Question

   Hugh, Inc. purchased merchandise for 300,000 FC from a British vendor on November 30, 20X3. Payment in British pounds is due January 31, 20X4. Exchange rates to purchase 1 FC is as follows:

	Nov. 30, 20X3	Dec. 31, 20X3
Spot	$1.65	$1.62
30 day	$1.64	$1.59
60 day	$1.63	$1.56

In the December 31, 20X3 income statement, what amount should Hugh report as foreign exchange gain from this transaction?

Answer 1

what amount should Hugh report as foreign exchange gain from this transaction?

Hugh report $9,000 as foreign exchange gain from this transaction

Purchase value of merchandise                   = 3,00,000 x $1.65 = $4,95,000

Amount to be reported in financials as on December 31, 20X3 as payables

= 3,00,000x $1.62        

= $4,86,000

Therefore, Hugh should $9000 report as foreign exchange gain from this transaction in income statement as on December 31, 20X3