Answer:
$4,000 gain
Explanation:
Some information was missing:
the spot rates for euros were:
- November 15, 20X3 $0.4955 per €1
- December 10, 20X3 $0.4875 per €1
- December 31, 20X3 $0.4675 per €1
- January 10, 20X4 $0.4475 per €1
In Chow's December 31, 20X3, income statement, the foreign exchange gain is ?
the goods costed €200,000 x 0.4875 = $97,500 on December 10, 20x3
the goods costed €200,000 x 0.4675 = $93,500 on December 31, 20x3
Since the goods were sold FOB shipping point, we have to use the shipping date (December 10) to calculate the original price. By December 31, the price in US dollars had decreased by $4,000 resulting in a foreign exchange gain.
