The accounting gain/loss due to the exchange rate change for Simpson Corporation is a loss of $200. This is calculated by comparing the U.S. Dollar values of the assets, equity, and liabilities at the beginning and ending balance sheets using different exchange rates.
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To calculate the accounting gain or loss due to the exchange rate change, we need to compare the beginning and ending balances of the foreign currency-denominated items when converted to U.S. Dollars using the different exchange rates.
Given:
Beginning exchange rate: $1 Euro = $1 U.S. Dollar
Ending exchange rate: $0.80 Euros = $1 U.S. Dollar
Beginning Balance Sheet in U.S. Dollars:
Assets = $3,000 Euros * $1 U.S. Dollar/$1 Euro = $3,000 U.S. Dollars
Equity = $1,500 Euros * $1 U.S. Dollar/$1 Euro = $1,500 U.S. Dollars
Liabilities = $1,500 Euros * $1 U.S. Dollar/$1 Euro = $1,500 U.S. Dollars
Ending Balance Sheet in U.S. Dollars:
Assets = $3,000 Euros * $0.80 U.S. Dollars/$1 Euro = $2,400 U.S. Dollars
Equity = $1,500 Euros * $0.80 U.S. Dollars/$1 Euro = $1,200 U.S. Dollars
Liabilities = $1,500 Euros * $0.80 U.S. Dollars/$1 Euro = $1,200 U.S. Dollars
Now, calculate the gain or loss:
Gain/Loss=Ending Balance−Beginning Balance
{Gain/Loss} = ($2,400 + $1,200 + $1,200) - ($3,000 + $1,500 + $1,500)
{Gain/Loss} = $5,800 - $6,000
{Gain/Loss} = - $200