To determine whether the foreign currencies (Euro and Japanese Yen) increased or decreased in dollar value from the date of the transaction to the settlement date, we need to consider the direction of foreign exchange rate movements.
Let's break down the scenarios:
1. **Euro Receivable:** If Smith Inc. had a Euro receivable, it means they were expecting to receive Euros in the future. To calculate whether the Euro increased or decreased in dollar value, we need to compare the exchange rate at the date of the transaction to the exchange rate at the settlement date.
- If the exchange rate at the settlement date was higher (i.e., more dollars per Euro) than the rate at the date of the transaction, then the Euro increased in dollar value, resulting in a foreign exchange gain for Smith Inc.
- If the exchange rate at the settlement date was lower (i.e., fewer dollars per Euro) than the rate at the date of the transaction, then the Euro decreased in dollar value, resulting in a foreign exchange loss for Smith Inc.
2. **Japanese Yen Payable:** If Smith Inc. had a Japanese Yen payable, it means they were obligated to pay Yen in the future. To determine whether the Yen increased or decreased in dollar value, we again need to compare the exchange rate at the date of the transaction to the rate at the settlement date.
- If the exchange rate at the settlement date was higher (i.e., more dollars per Yen) than the rate at the date of the transaction, then the Yen increased in dollar value, resulting in a foreign exchange loss for Smith Inc.
- If the exchange rate at the settlement date was lower (i.e., fewer dollars per Yen) than the rate at the date of the transaction, then the Yen decreased in dollar value, resulting in a foreign exchange gain for Smith Inc.
So, to determine whether the foreign currencies increased or decreased in dollar value, you would need to know the specific exchange rates at the date of the transaction and the settlement date for both the Euro and the Japanese Yen. The foreign exchange gains recorded by Smith Inc. suggest that one or both of these currencies increased in dollar value during that period.