Grete Corp. had the following foreign currency transactions during 2015: • Purch

Question

Grete Corp. had the following foreign currency transactions during 2015: • Purchased merchandise from a foreign supplier on January 20, 2015, for the U.S. dollar equivalent of $64,000 and paid the invoice on April 20, 2015, at the U.S. dollar equivalent of $76,000. • On September 1, 2015, borrowed the U.S. dollar equivalent of $340,000 evidenced by a note that is payable in the lender’s local currency on September 1, 2016. On December 31, 2015, the U.S. dollar equivalent of the principal amount was $362,000. In Grete’s 2015 income statement, what amount should be included as a foreign exchange loss?

Explanation / Answer

Foreign exchange loss in Grete’s 2015 income statement = $12,000 + $22,000 = $34,000

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