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 2011, Benjamin acquires 20,000 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:
September 1, 2011 | $0.46 |
December 1, 2011 | 0.44 |
December 31, 2011 | 0.48 |
March 1, 2012 | 0.45 |
a. Assume that Benjamin acquired the widgets on December 1, 2011, and made payment on March 1, 2012. What is the effect of the exchange rate fluctuations on reported income in 2011 and in 2012?
b. Assume that Benjamin acquired the widgets on September 1, 2011, and made payment on December 1, 2011. What is the effect of the exchange rate fluctuations on reported income in 2011?
c. Assume that Benjamin acquired the widgets on September 1, 2011, and made payment on March 1, 2012. What is the effect of the exchange rate fluctuations on reported income in 2011 and in 2012?
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