Question

Norton Co., a U.S. corporation, sold inventory on December 1, 2018, with payment of 10,000 British pounds to be received in sixty days. The pertinent exchange rates were as follows: Dec. 1 Spot rate: $ 1.7241 Dec. 31 Spot rate: $ 1.8182 Jan. 30 Spot rate: $ 1.6666 What amount of foreign exchange gain or loss should be recorded on January 30?

Answer 1

exchange loss on 30 January is -$1,516

Step-by-step explanation:

The amount of loss or gain to recognize in the books on January 30 depends on the movement in exchange rate between December 31 and January 30.

Invariably,exchange rate has declined by -0.1516 (1.6666-1.8182) between December 31 and January 30,hence the exchange loss that should be recorded on January is shown below:

exchange loss= -0.1516 *10,000=-$1,516