Homestyle Brands imports materials from other countries and exports nished produ

ID: 2606903 • Letter: H

Question

Homestyle Brands imports materials from other countries and exports nished products to customers throughout the world. Information regarding four such transactions occurring in the last accounting period, all denominated in units of foreign currency, is given below:

Calculate gain or loss for each of the four scenarios.

Country Amount Spot Rate at transaction date Spot Rate at payment date Import from Taiwan 100,000 Taiwan dollars $0.033 $0.038 Import from Poland 600,000 zloty 0.300 0.285 Export to Brazil 400,000 reais 0.421 0.403 Export to Switzerland 950,000 Swiss francs 1.050 1.084

Explanation / Answer

Answer

Country

Amount (A)

Spot Rate at transaction date (B)

Dollar required to be paid (C=A x B)

Spot Rate at payment date (D)

Dollar paid (E=A x D)

Exchange gain/(loss) (F= C – E)

Import from Taiwan

100,000 Taiwan dollars

$0.033

$3300

$0.038

$3800

$(500)

Import from Poland

600,000 zloty

$0.3

$180000

$0.285

$171000

$9000

Export to Brazil

400,000 reais

$0.421

$168400

$0.403

$161200

$7200

Export to Switzerland

950,000 Swiss francs

$1.05

$997500

$1.084

$1029800

$(32300)