Final answer:
The Peerless Corporation must account for changes in exchange rates in its sales journal entries. The entries include the initial sale, an adjustment on September 30 for the increased exchange rate, and the final entry on October 15 upon receiving payment.
Step-by-step explanation:
The Peerless Corporation, based in the U.S., engaged in an international sale involving a foreign currency, requires proper accounting for the effect of exchange rate changes on its sale. On September 15, Peerless sold goods for 111,000 crowns when the rate was $0.59 per crown. By September 30, the exchange rate increased to $0.64 per crown, and it was necessary to adjust for the unrealized gain or loss in the interim financial statements due to the changing rate. When the payment was received on October 15, the rate was $0.62 per crown. Below are the journal entries Peerless Corporation would prepare.
It's crucial for businesses like Peerless to carefully monitor foreign currency exchange rate fluctuations, as they can dramatically affect the value of international transactions and ultimately, profits. For example, the rapid changes in the value of British pound around the Brexit vote highlight the impact that exchange rates can have. Demand for exports is also dependent on how the value of the dollar influences the pricing of goods abroad, emphasizing the significance of currency movements in international trade.