If a U. S. Company purchases inventory on account for $32,000 euros from a Briti

Question

If a U. S. Company purchases inventory on account for $32,000 euros from a British Company when the exchange rate is $1 to $1.28 euros, how would the British Company recognize the sales revenue and the accounts receivable?

Question 12 options:

?sales revenue of $32,000 and accounts receivable of $32,000

?sales revenue of $25,000 and accounts receivable of $25,000

?sales revenue of $32,000 and accounts receivable of $25,000 with a $7,000 foreign currency translation loss

?sales revenue of $25,000 and accounts receivable of $32,000 with a $7,000 foreign currency translation gain

?sales revenue of $32,000 and accounts receivable of $32,000

?sales revenue of $25,000 and accounts receivable of $25,000

?sales revenue of $32,000 and accounts receivable of $25,000 with a $7,000 foreign currency translation loss

?sales revenue of $25,000 and accounts receivable of $32,000 with a $7,000 foreign currency translation gain

Explanation / Answer

Solution:

As U.S. company purhcase inventory in terms of value of $32,000 Euro i.e. foreign currency, therefore British company will recognize sales at $32000

Hence Sales revenue of $32,000 and accounts receivables of $32,000 will be recognized by britishg company.

first option is correct.

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