On May 20, 2019, when the spot rate is $1.08/€, a U.S. company buys merchandise from a supplier in Italy, at a cost of €100,000. The spot rate is $1.05/€ on June 30, the company’s year‑end. Payment of €100,000 is made on July 30, 2019, when the spot rate is $1.12/€. What is the effect on fiscal 2019 and fiscal 2020 income? Fiscal 2019 Fiscal 2020 a. No effect $4,000 exchange loss b. $3,000 exchange loss $7,000 exchange gain c. No effect $4,000 exchange gain d. $3,000 exchange gain $7,000 exchange loss
On May 20, 2019, when the spot rate is $1.08/€, a U.S. company buys merchandise from a supplier in Italy, at a cost of €100,000. The spot rate is $1.05/€ on June 30, the company’s year‑end. Payment of €100,000 is made on July 30, 2019, when the spot rate is $1.12/€. What is the effect on fiscal 2019 and fiscal 2020 income? Fiscal 2019 Fiscal 2020 a. No effect $4,000 exchange loss b. $3,000 exchange loss $7,000 exchange gain c. No effect $4,000 exchange gain d. $3,000 exchange gain $7,000 exchange loss
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
| 1. On May 20, 2019, when the spot rate is $1.08/€, a U.S. company buys merchandise from a supplier in Italy, | ||||||
| at a cost of €100,000. The spot rate is $1.05/€ on June 30, the company’s year‑end. Payment of €100,000 | ||||||
| is made on July 30, 2019, when the spot rate is $1.12/€. What is the effect on fiscal 2019 and fiscal 2020 | ||||||
| income? | ||||||
| Fiscal 2019 Fiscal 2020 | ||||||
| a. No effect $4,000 exchange loss | ||||||
| b. $3,000 exchange loss $7,000 exchange gain | ||||||
| c. No effect $4,000 exchange gain | ||||||
| d. $3,000 exchange gain $7,000 exchange loss |
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