Question

Brief, Inc., had a receivable from a foreign customer that is payable in the customer’s local currency. On December 31,2017, Brief correctly included this receivable for 200,000 local currency units (LCU) in its balance sheet at $110,000. WhenBrief collected the receivable on February 15, 2018, the US. dollar equivalent was $120,000. In Brief's 2018 consolidatedincome statement, how much should it report as a foreign exchange gain?a. 5—0—b. 510,000c. 515,000d. 525,000

Answer 1

Answer:

The Foreign exchange gain is $10,000.

Explanation:

The amount of gain that should be reported as the foreign exchange loss is the excess of dollar equivalent over reported local currency units (LUCs), so the Foreign exchange gain is calculated as follows:

Foreign exchange gain = dollar equivalent - local currency units

                                       = $120,000 - $110,000

                                       = $10,000

Therefore, The Foreign exchange gain is $10,000.