ACCA FR · Chapter 11 · Question 4 of 5
On 1 November Peregrine Co (functional currency $) sold goods on credit for €200,000, when the rate was €1.25 = $1. On 1 December it received €100,000 when the rate was €1.3 = $1. The rest was still outstanding at 31 December, when the rate was €1.2 = $1. What is the net exchange difference in profit or loss for the year? (Round to the nearest dollar.)
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Net gain of $256
Explanation
The sale and receivable are recorded at $160,000 (€200,000 / 1.25). Settled part: €100,000 was carried at $80,000 and received as $76,923, a loss of $3,077. Outstanding part, a monetary item retranslated at the closing rate: €100,000 / 1.2 = $83,333 against $80,000, a gain of $3,333. Net = $3,333 - $3,077 = gain of $256.