Asked by Yanisa Silalai on Jul 02, 2024
Verified
Marshall Company sold supplies in the amount of €25,000 (euros) to a French company when the exchange rate was $1.21 per euro.At the time of payment,the exchange rate decreased to $0.82.Marshall must record a:
A) gain of $9,750.
B) gain of $20,500.
C) loss of $9,750.
D) loss of $20,500.
E) neither a gain nor loss.
Exchange Rate
The value of one currency for the purpose of conversion to another, affecting international trade and investments.
Gain
The financial profit obtained when the selling price of an asset exceeds its purchase price.
Euros
The official currency of the Eurozone, which consists of 19 of the 27 European Union member states.
- Acquire knowledge on the treatment of foreign exchange transactions in accounting and how fluctuations in exchange rates influence this.
Verified Answer
GS
Güngör Sa?d?ç6 days ago
Final Answer :
C
Explanation :
At the time of sale, the value was 25,000 euros * $1.21/euro = $30,250. At the time of payment, the value was 25,000 euros * $0.82/euro = $20,500. The decrease in value ($30,250 - $20,500) equals a loss of $9,750.
Learning Objectives
- Acquire knowledge on the treatment of foreign exchange transactions in accounting and how fluctuations in exchange rates influence this.