On May 1,2014,Deerfield Corporation purchased merchandise from a German firm for 78,000 euros when the spot rate for the euro was 1.48 euro per dollar.The account payable was denominated in the euro.Deerfield settled the account on August 1 when the spot rate for the euro was 1.39 euro per dollar.How much cash will Deerfield have to disburse to settle the account?

Question

Quizplus · Accepted Answer

Firstly, we need to calculate the amount in dollars that Deerfield would have had to pay on May 1st:

78,000 euros * 1.48 dollars/euro = $115,440

Then, we need to calculate the amount in dollars that Deerfield actually paid on August 1st:

78,000 euros * 1.39 dollars/euro = $108,420

Therefore, Deerfield will have to disburse $108,420 to settle the account. The correct answer is B.

On May 1,2014,Deerfield Corporation Purchased Merchandise from a German Firm