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Homework answers / question archive / What amount of foreign exchange gain or loss should be reflected in Ouyang's 20X1 consolidated net income? Ouyang, Inc
What amount of foreign exchange gain or loss should be reflected in Ouyang's 20X1 consolidated net income?
Ouyang, Inc.'s Chinese subsidiary borrowed 800,000 euros on Jun 1, 20X1. Exchange rates in 20X1 between the Chinese (Yuan) and euro (C) and between the U.S. dollar ($) and Yuan are as follows:
Yuan per US$ per C Yuan
1-Jun 2.40 $0.46 Average for the year 2.5 0.42 31-Dec 2.6 0.48
Computation of Foreign exchange gain (Loss) reflected in consolidated net income:
Amount borrowed = 800,000 euros
Value in BRL = 800,000 * (2.60 - 2.40) = 160,000
Foreign exchange gain (Loss) reflected in consolidated net income
= 160,000 * Average 0.42
= $67,200 loss
