Assume that Lewis International sells running shoes to a British importer on June 1 and that the sale is denominated at £75,000 and will be collected on July 15. Also assume that Lewis closes its books at the end of each month. The following are the relevant exchange rates.
$ \begin{array}{ll}\text { Spot rate on June 1 } & \$ 1.6200 \ \text { Forward rate for July } & \ \text { 15 delivery } & \$ 1.6000 \ \text { Spot rate on June 30 } & \$ 1.6100 \ \text { Spot rate on July 15 } & \$ 1.5950\end{array} $

For questions 25-29, assume FASB Statement 52 treatment and that Lewis enters into a forward contract.
-The difference between the spot rate on June 1 and the forward rate is a

Question

Assume that Lewis International sells running shoes to a British importer on June 1 and that the sale is denominated at £75,000 and will be collected on July 15. Also assume that Lewis closes its books at the end of each month. The following are the relevant exchange rates.
 $ \begin{array}{ll}\text { Spot rate on June 1 } & \$ 1.6200 \ \text { Forward rate for July } & \ \text { 15 delivery } & \$ 1.6000 \ \text { Spot rate on June 30 } & \$ 1.6100 \ \text { Spot rate on July 15 } & \$ 1.5950\end{array} $

For questions 25-29, assume FASB Statement 52 treatment and that Lewis enters into a forward contract.
-The difference between the spot rate on June 1 and the forward rate is a

Quizplus · Accepted Answer

The difference between the spot rate on June 1 ($1.6200) and the forward rate for July 15 delivery ($1.6000) is $0.0200 per pound. With the sale denominated at £75,000, the difference amounts to a $1,500 foreign exchange loss because Lewis would receive $0.0200 less per pound than the rate on June 1, calculated as £75,000 * $0.0200 = $1,500.

Assume That Lewis International Sells Running Shoes to a British