Question

Let’s suppose you (USA dealer) imported a product from German on Dec 1, 2018 at € 300, payable in 60 days. You sold the product in the US market at $400 in cash on Dec 15, 2018. The company's fiscal year ends on Dec 31. You paid to your German supplier on Feb 1, 2019.  

Below, please find the exchange rate information:

Dec 1, 2018: 2.0 €/$.

Dec 31, 2018: 1.5 €/$.

Feb 1, 2019: 3.0 €/$.

What was profit or loss from these transactions (in 2018 and 2019 combined)?

Answer is $200- I just need to learn the steps please

Answer 1

Net income/loss for 2018:

Cost of product in euro	300
Sale price in ($)	$400
Euro liability as on 31st December in USD (300 / 1.5)	$200
Net income in 2018 (400 - 200)	$200

Net income/loss for 2019:

Paid to the german supplier on Feb 1 @ 3 Euro / $,

Therefore USD payable (300 / 3) = $100.

Euro liability as on 31st December in USD (300 / 1.5) = $200

Net Income for 2019 = ($200 - $100) = $100.

The profit or loss from these transactions (in 2018 and 2019 combined) = $200 + $100 = $300.