Question

Delta Corporation (a U.S. company) has several transactions with foreign entities. On December 2, 20X1, Delta bought items from foreign company at a price of 300,000 yen when the direct exchange rate was 1 yen = $1.17. Delta made payment to the foreign company on December 20, 20X1, when the exchange rate had changed to 1 yen = $1.21. The foreign exchange gain or loss reported by Delta from this transaction will be:

Answer 1

$12,000 gain

Step-by-step explanation:

From the above information given the yen has depreciated relative to the dollar amount between the date of the transaction and the date of payment.

The Amount of the gain will be:

Price = 300,000

Direct exchange rate( 1 yen )= $1.17

Change in exchange rate ( 1 yen)= $1.21

Hence:

($1.21x 300,000) – ($1.17x 300,000)

=$363,000-$351,000

=$12,000 gain