Chapter 11, Problem 1SBD

On July 1, 2020, Mifflin Company borrowed 200,000 euros from a foreign lender evidenced by an interest-bearing note due on July 1, 2021. The note is denominated in euros. The U.S. dollar equivalent of the note principal is as follows: LO 9-2 LO 9-2 LO 9-2 LO 9-2, 9-3 Problems 1. Which of the following combinations correctly describes the relationship between foreign currency transactions, exchange rate changes, and foreign exchange gains and losses? LO 9-1 Type of Transaction Foreign Currency Foreign Exchange Gain or Loss a. Export sale Appreciates Loss b. Import purchase Appreciates Gain c. Import purchase Depreciates Gain d. Export sale Depreciates Gain Date Amount July 1, 2020 (date borrowed). . . . . . . . . . . . . . . . . . . . . . . . . $225,000 December 31, 2020 (Mifflin’s year-end). . . . . . . . . . . . . . . . 220,000 July 1, 2021 (date repaid). . . . . . . . . . . . . . . . . . . . . . . . . . . . 210,000 In its 2021 income statement, what amount should Mifflin include as a…

On December 20, 2020, Momeier Company (a U.S.-based company) sold parts to a foreign customer at a price of 45,000 rials. Payment is received on January 10, 2021. Currency exchange rates are as follows:   Date U.S. Dollar per Rial December 20, 2020 $ 1.14 December 31, 2020   1.11 January 10, 2021   1.07     How does the fluctuation in the U.S. dollar per rial exchange rate affect Momeier’s 2020 income statement? How does the fluctuation in the U.S. dollar per rial exchange rate affect Momeier’s 2021 income statement?

On December 20, 2020, Momeier Company (a U.S.-based company) sold parts to a foreign customer at a price of 175,000 rials. Payment is received on January 10, 2021. Currency exchange rates are as follows:   Date U.S. Dollar per Rial December 20, 2020 $ 1.27 December 31, 2020   1.24 January 10, 2021   1.20     How does the fluctuation in the U.S. dollar per rial exchange rate affect Momeier’s 2020 income statement?