Answer:
2017 = ($6,400)
2018 = $4,800
Explanation:
The effect of the exchange rate fluctuations on reported income in 2017 and in 2018 is shown below:-
Particulars Amount
Purchased widgets 20,000
Purchased price 8
Total inventory 160,000
(20,000 × 8)
Total inventory at Dec 1,2017 $70,400
(160,000 × $0.44)
Total inventory at Dec 31,2017 $76,800
(160,000 × $0.48)
Foreign exchange gain/(loss)
at reporting date ($6,400)
($70,400 - $76,800)
Total inventory at March 1, 2018 $72,000
(160,000 × $0.45)
Foreign exchange gain/(loss)
when payment is made
on March 1, 2018 $4,800
($76,800 - $72,000
)
So, the Foreign exchange loss in 2017 is ($6,400) and the Foreign exchange gain in 2018 is $4,800
