Question #61
Reading: Reading 10 Multinational Operations
PDF File: Reading 10 Multinational Operations.pdf
Page: 35
Status: Unattempted
Question
Sycamore Systems sold $5 million worth of software on December 1, 20X1 to a Japanese company with payment denominated in Japanese yen to be received in two months. Sycamore's year end is 31st December. Payment was received on 31 Jan 20X2. Exchange rates (1 US
Answer Choices:
A. gain of $280,000
B. gain of $580,000
Explanation
Sale amount = $5 million × 95 = 475 million yen. Accounts receivable on sale date = $5
million.
Accounts receivable at year-end = 475 million yen/90 = $5.28 million
The appreciation of the yen resulted in a gain of $280,000 on the balance sheet date and
would be recognized in the income statement.