A U.S. manufacturer has sold computer services to a foreign firm and received 200,000 foreign currency units (FCs). The exchange rates were 1 FC = $.75 on the date of the sale and 1 FC = $.80 when the receivable was settled. On the transaction date, the settlement exchange rate is estimated to be 1 FC = $.72. By the settlement date, what is the total exchange gain or loss recorded for the transaction if the two-transaction method is used?

Question

Quizplus · Accepted Answer

The exchange gain is calculated based on the difference between the exchange rate at the date of sale and the rate at settlement. The sale was recorded at 1 FC = $.75, and the settlement was at 1 FC = $.80. The gain is (0.80 - 0.75) * 200,000 FC = $10,000.

A US Manufacturer Has Sold Computer Services to a Foreign Firm