Question

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

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)

Homework Answers

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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