An American company makes a credit sale of goods to a company in London for 10,000 British pounds. On the date of sale, the exchange rate was $1.60 per pound. However, on the date payment was received, the exchange rate had risen to $1.70 per pound. As a result, the American company would record

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The American company would record an exchange gain of $1,000 because the exchange rate increased from $1.60 to $1.70 per pound, resulting in more dollars received when the payment was made. The gain is calculated as (10,000 pounds * $1.70) - (10,000 pounds * $1.60) = $17,000 - $16,000 = $1,000.

An American Company Makes a Credit Sale of Goods to a Company