1. A U.S. company sells merchandise to customers in Taiwan. The merchandise is p

Question

1. A U.S. company sells merchandise to customers in Taiwan. The merchandise is priced in Taiwan dollars, and customers generally take 60 days to pay for the merchandise. The U.S. company’s sales revenue, reported on its income statement, is expressed in U.S. dollars converted at:

A. The rate at the end of the accounting year

B. The rate when the sales were made

C. The rate when the company received the purchase order from the customer

D. The rate when the company received payment from the customer

Explanation / Answer

Correct answer is B. The rate when the sales were made

The sales, purchase and other transactions made in the foreign currency are recorded in the books at the rate prevailing on the date of transactions. While the balances reported in the balance sheet are restated using the rate on the date of balance sheet, the income statement items are reported at the amount at which they were originally recorded.

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