Question

Brief, Inc., had a receivable from a foreign customer that is payable in the customer's local currency. On December 31, 2020, Brief correctly included this receivable for 372,500 local currency units (LCU) in its balance sheet at $240,000. When Brief collected the receivable on February 15, 2021, the U.S. dollar equivalent was $252,500. In Brief's 2021 consolidated income statement, how much should it report as a foreign exchange gain

Answer 1

The amount that should be reported as a foreign exchange gain is: $12,500.

Foreign exchange gain

Using this formula

Foreign exchange gain=U.S. dollar equivalent - Local currency units (LCU)

Let plug in the formula

Foreign exchange gain=$252,500-$240,000

Foreign exchange gain=$12,500

Therefore the amount that should be reported as a foreign exchange gain is: $12,500.

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