Answer:
There would be a foreign exchange loss of $1,500 that would ne recognized in the 2017 income statement.
Explanation:
Income statement is a component of the company's financial statements that shows the financial performance.
Based on<em> IAS 21 the Effects of Changes in Foreign Exchange Rates</em>, the translation method for assets and liabilities is the closing rate. It can be established that the parts Butanta sold to a foreign customer were recorded as Accounts receivable (Asset), therefore, the translation method by IAS 21 above applies.
In the question, we have the following rates:
December 20, 2017: 1 ostra : $1.08
December 31, 2017: 1 ostra : $1.05
January 10, 2018 1 ostra : $1.01
As at December 31, 2017: (50,000 x $1.05) - (50,000 x $1.08) = $1,500 (foreign exchange loss)
On January 10, 2018 when payment is received, there would be a further loss of: (50,000 x $1.01) - (50,000 x $1.05) = $2,000 (foreign exchange loss)
