Question

On December 20, 2017, Butanta Company (a U.S. company headquartered in Miami, Florida) sold parts to a foreign customer at a price of 105,000 ostras. Payment is received on January 10, 2018. Currency exchange rates for 1 ostra are as follows:December 20, 2017 $ 1.20December 31, 2017 1.17January 10, 2018 1.13a. How does the fluctuation in exchange rates affect Butanta's 2017 income statement?b. How does the fluctuation in exchange rates affect Butanta's 2018 income statement?

Answer 1

Answer:

The appropriate solution is:

(a) $3150

(b) $4200

Explanation:

According to the question,

(a)

The exchange loss will be:

= $(1.20-1.17)\times 105000$

= $0.03\times 105000$

= $3150$ ($)

(b)

The exchange loss will be:

= $(1.17-1.13)\times 105000$

= $0.04\times 105000$

= $4200$ ($)