Asked by matthew guardanapo on Jun 06, 2024
Verified
Maroon Company sold supplies in the amount of €15,000 (euros)to a French company when the exchange rate was $1.15 per euro.At the time of payment,the exchange rate decreased to $1.12.Maroon must record a loss of $450.
Exchange Rate
The price at which one currency can be exchanged for another currency in the foreign exchange market.
Loss
A financial condition where expenses exceed income, leading to a negative net income.
Euros
The official currency of the Eurozone, used by 19 of the 27 European Union countries.
- Comprehend the accounting treatment for foreign exchange transactions and the impact of exchange rate fluctuations.
Verified Answer
AW
Alyce WilliamsJun 09, 2024
Final Answer :
True
Explanation :
To determine the loss or gain from a foreign currency transaction, the exchange rate at the time of sale and the exchange rate at the time of payment must be compared. In this case, the euro weakened against the dollar, so Maroon Company will record a loss of $450.
Learning Objectives
- Comprehend the accounting treatment for foreign exchange transactions and the impact of exchange rate fluctuations.