On November 1, a French company purchased machinery from an American company for 800,000 euros when the exchange rate was $0.83. When preparing financial statements on December 31, assuming the rate for Euros was $0.88, what amount of gain or loss should the American company report?

Question

Quizplus · Accepted Answer

The American company initially recorded the sale at $664,000 (800,000 euros x $0.83). By December 31, the value of the euros increased to $704,000 (800,000 euros x $0.88). The difference of $40,000 ($704,000 - $664,000) is a gain.

On November 1, a French Company Purchased Machinery from an American