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 |
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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