Question

What would be the net impact on Rutgers NY Corp.'s 2018 income statement related to this transaction?

Rutgers NJ Corp. sold parts to a Russian customer on December 16, 2018, with payment of 10 million Russian won to be received on January 15, 2019. The following exchange rates applied:

Date	Spot Rate	Forward Rate on Jan 15
December 16, 2018	$ .00092	$ .00098
December 31, 2018	$ .00090	$ .00093
January 15, 2019	$ .00095	$ .00095

a. $ 500 (gain).

b. $ 500 (loss).

c. $ 200 (gain).

d. $ 200 (loss).

e. $300 (gain)

Answer 1

Answer

Explanation :

The difference between the spot rates on the 2 dates will give us the amount of net gain/loss.

Spot Rate - 16th December 2018 = .00092

Spot Rate - 31st December 2018 = .00090

Gain/Loss = 10,000,000*(.00090 - .00092)

= $200 (Loss)

There is a loss because the spot rate on 31st December 2018 has gone down from the spot rate as on 16th December 2018.

Therefore, Correct Option is d. $200 (Loss)

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