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 would report a $40,000 gain because the value of the euros received for the machinery increased from the time of sale ($0.83) to the time of preparing financial statements ($0.88). The calculation is as follows: (800,000 euros * $0.88) - (800,000 euros * $0.83) = $704,000 - $664,000 = $40,000 gain.

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