On March 1, Laton Products (a U.S. firm) purchased manufacturing inputs from a Mexican supplier for 20,000 pesos, payable on June 1. The exchange rate for pesos on March 1 was $0.17. If the exchange rate increases to $0.19 on June 1, what amount of gain or loss would be reported by Laton related to the currency exchange?

Question

Quizplus · Accepted Answer

To calculate the gain or loss related to the currency exchange, we need to convert the payable amount in pesos to USD using both exchange rates.
- On March 1: 20,000 pesos x $0.17 = $3,400
- On June 1: 20,000 pesos x $0.19 = $3,800

The difference between these two amounts is the gain or loss:
$3,800 - $3,400 = $400 loss

Since Laton Products has to pay more USD to settle the payable in pesos, it incurs a loss of $400. Therefore, the correct answer is C.

On March 1, Laton Products (A U