A U.S. company sells merchandise to a foreign company denominated in U.S. dollars. Which of the...

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A U.S. company sells merchandise to a foreign company denominated in U.S. dollars. Which of the...

A U.S. company sells merchandise to a foreign company denominated in U.S. dollars. Which of the following statements is true?

A) If the foreign currency depreciates, a foreign exchange loss will result.

B) No foreign exchange gain or loss will result.

C) If the foreign currency depreciates, a foreign exchange gain will result.

D) If the foreign currency appreciates, a foreign exchange loss will result

E) If the foreign currency appreciates, a foreign exchange gain will result.

business accounting

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Answer 1

Answer #1

Ans.

If a U.S. company sells merchandise to a foreign company denominated in U.S. dollars.

B) No foreign exchange gain or loss will result.

Explaination

In the abpve case the U.S. company sells the merchandise to a foreign company and the foreign company is also uses the same currency as that of U.S. company i.e US dollars.

Therefore the currency of both the companies are same there will be no foreign exchange gain or loss will occur to US company on transaction of sell to this foreign company.

So the correct option is B.

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Answer 2

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