Brown Company sold supplies in the amount of 15,000 euros to a French company when the exchange rate was $1.15 per euro. At the time of payment, the exchange rate decreased to $1.12. Brown must record a loss of $450.

Question

Quizplus · Accepted Answer

To determine the loss or gain on a foreign currency transaction, the company must use the spot rate on the date of the transaction and the date of payment. 
In this case, Brown Company sold supplies for 15,000 euros when the exchange rate was $1.15 per euro, which equals $17,250. 
At the time of payment, the exchange rate decreased to $1.12 per euro. To determine the loss, we must convert the 15,000 euros at the new spot rate, which equals $16,800. 
The difference between the original transaction amount and the amount received at the time of payment is $450, which represents a loss to Brown Company.

Brown Company Sold Supplies in the Amount of 15,000 Euros