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Benjamin, Inc., operates an export/import business. The company has considerable dealings with companies in the country...

Benjamin, Inc., operates an export/import business. The company has considerable dealings with companies in the country of Camerrand. The denomination of all transactions with these companies is alaries (AL), the Camerrand currency. During 2017, Benjamin acquires 31,000 widgets at a price of 8 alaries per widget. It will pay for them when it sells them. Currency exchange rates for 1 AL are as follows:

eptember 1, 2017 $ 0.48
December 1, 2017 0.42
December 31, 2017 0.50
March 1, 2018 0.43
  1. Assume that Benjamin acquired the widgets on December 1, 2017, and made payment on March 1, 2018. What is the effect of the exchange rate fluctuations on reported income in 2017 and in 2018?
  2. Assume that Benjamin acquired the widgets on September 1, 2017, and made payment on December 1, 2017. What is the effect of the exchange rate fluctuations on reported income in 2017?
  3. Assume that Benjamin acquired the widgets on September 1, 2017, and made payment on March 1, 2018. What is the effect of the exchange rate fluctuations on reported income in 2017 and in 2018?
Effect of Exchange Rate Fluctuations
a. 2017 gain or loss?
2018
gain or loss?
b. 2017
gain or loss?
c. 2017
gain or loss?
2018
gain or loss?
business   accounting   
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Answer #1

Answer:

Effect of exchange rate fluctuations
a 2017 Loss 19,840 (31000*8*(0.50-0.42))
2018 Gain 17,360 (31000*8*(0.50-0.43)
b 2017 Gain 14,880 (31000*8(0.48-0.42))
c 2017 Loss 4,960 (31000*8*(0.50-0.48))
2018 Gain 17,360 (31000*8*(0.50-0.43))
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