NOD Corp. (a U.S.-based company) sold parts to a Hong Kong customer on December

Question

NOD Corp. (a U.S.-based company) sold parts to a Hong Kong customer on December 15 with payment of 100,000 Hong Kong dollars to be received in thirty days on January 15. The following exchange rates apply:
Spot Forward Rate 1/15
12/15 $0.15 $0.16
12/31 $0.16 $0.17
1/15 $0.17 $0.18
Assuming no forward contract was entered into, how much foreign exchange gain or loss should NOD report on its December 31 income statement with regard to this transaction? (For purposes of this exercise, use a present value factor of 1.)

Explanation / Answer

Dollar Value of receivable @ 12/31/CY (100,000 HK * $.16) 16,000
Dollar Value of receivable @ 12/15/CY (100,000 HK * $.15)
Increase $ 1,000 Gain

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