Suppose 1 year ago Hein Company had inventory in Britain valued at 240,000 pounds.The exchange rate for dollars to pounds was £1 = 2 Canadian dollars.This year,the exchange rate is £1 = 1.82 Canadian dollars.The inventory in Britain is still valued at 240,000 pounds.What is the gain or loss in inventory value in Canadian dollars as a result of the change in exchange rates?

Question

Quizplus · Accepted Answer

Last year, the inventory value in Canadian dollars was 240,000 pounds * 2 CAD/pound = 480,000 CAD. This year, it's 240,000 pounds * 1.82 CAD/pound = 436,800 CAD. The loss in value is 480,000 CAD - 436,800 CAD = 43,200 CAD.

Suppose 1 Year Ago Hein Company Had Inventory in Britain