Asked by Grace Mackosso on May 01, 2024
Verified
Kim Manufacturing purchased on credit £20,000 worth of parts from a British company when the exchange rate was $1.66 per British pound.At the year-end balance sheet date,the exchange rate increased to $1.69.Kim must record a gain of $600.
Exchange Rate
The rate at which one currency can be exchanged for another, often determined by the foreign exchange market.
British Pound
The official currency of the United Kingdom, also known as GBP (Great British Pound).
- Acquire knowledge on the effects of fluctuating foreign exchange rates on global transactions and their reflection in financial statements.
Verified Answer
CA
cesar amsellemMay 06, 2024
Final Answer :
False
Explanation :
The increase in the exchange rate from $1.66 to $1.69 per British pound would actually result in a higher USD amount required to settle the liability, thus leading to a loss, not a gain, for Kim Manufacturing.
Learning Objectives
- Acquire knowledge on the effects of fluctuating foreign exchange rates on global transactions and their reflection in financial statements.