Doering Company, a U. S. corporation with customers in several foreign countries, had the following selected transactions for 2013 and 2014. 2013 Apr. 8 Sold merchandise to Salinas & Sons of Mexico for $ 5,938 cash. The exchange rate for pesos is $ 0.1043 on this day.
July 21 Sold merchandise on credit to Sumito Corp. in Japan. The price of 1.5 million yen is to be paid 120 days from the date of sale. The exchange rate for yen is $ 0.0094 on this day.
Oct. 14 Sold merchandise for 19,000 pounds to Smithers Ltd. of Great Britain, payment in full to be received in 90 days. The exchange rate for pounds is $ 1.4566 on this day.
Nov. 18 Received Sumito's payment in yen for its July 21 purchase and immediately exchanged the yen for dollars. The exchange rate for yen is $ 0.0092 on this day.
Dec. 20 Sold merchandise for 17,000 ringgits to Hamid Albar of Malaysia, payment in full to be received in 30 days. On this day, the exchange rate for ringgits is $ 0.4501.
Dec. 31 Recorded adjusting entries to recognize exchange gains or losses on Doering's annual financial statements. Rates for exchanging foreign currencies on this day follow.
Pesos (Mexico) . . . . . . . . . . $ 0.1055
Yen (Japan) . . . . . . . . . . . . . . 0.0093
Pounds (Britain) . . . . . . . . . . . 1.4620
Ringgits (Malaysia) . . . . . . . . 0.4456
2014 Jan. 12 Received full payment in pounds from Smithers for the October 14 sale and immediately exchanged the pounds for dollars. The exchange rate for pounds is $ 1.4699 on this day.
Jan. 19 Received Hamid Albar's full payment in ringgits for the December 20 sale and immediately exchanged the ringgits for dollars. The exchange rate for ringgits is $ 0.4420 on this day.
Required:
1. Prepare journal entries for the Doering transactions and adjusting entries (round amounts to the nearest dollar).
2. Compute the foreign exchange gain or loss to be reported on Doering's 2013 income statement.
Analysis Component: 3. What actions might Doering consider to reduce its risk of foreign exchange gains or losses?