Question

9. Refer to the following fact pattern: Star Corporation had a realized foreign exchange loss of $11,000 for the year (on the collection of its accounts receivable from a foreign customer). Star had a $7,000 credit resulting from the translation to dollars of the accounts of its wholly-owned foreign subsidiary for the year. Star had an account payable to an unrelated foreign supplier to be paid in the supplier's local currency. The dollar equivalent of the payable was $60,000 on the October 31 invoice date and $65,000 on December 31" Year 1. The invoice is payable on January 30h in Year

Answer 1

9.

Net loss to be reported in income statement due to foreign currency fluctuations:
		Amount($)
Realised Forex loss		(11,000)
Credit arising from the accounts of Subsidiaries		7,000
Translation gain/loss on Accounts Payable(Working Note)		(5,000)
Net loss to be reported in income statement due to foreign currency fluctuations		(9,000)
Working Note:
Account payable on Invoice date in $		60,000
Account payable on year end date in $		65,000
Translation gain/( loss)		(5,000)