If a U. S. Company purchases inventory on account for $32,000 euros from a Briti
ID: 2515001 • Letter: I
Question
If a U. S. Company purchases inventory on account for $32,000 euros from a British Company when the exchange rate is $1 to $1.28 euros, how would the British Company recognize the sales revenue and the accounts receivable?
Question 12 options:
?sales revenue of $32,000 and accounts receivable of $32,000
?sales revenue of $25,000 and accounts receivable of $25,000
?sales revenue of $32,000 and accounts receivable of $25,000 with a $7,000 foreign currency translation loss
?sales revenue of $25,000 and accounts receivable of $32,000 with a $7,000 foreign currency translation gain
?sales revenue of $32,000 and accounts receivable of $32,000
?sales revenue of $25,000 and accounts receivable of $25,000
?sales revenue of $32,000 and accounts receivable of $25,000 with a $7,000 foreign currency translation loss
?sales revenue of $25,000 and accounts receivable of $32,000 with a $7,000 foreign currency translation gain
Explanation / Answer
Solution:
As U.S. company purhcase inventory in terms of value of $32,000 Euro i.e. foreign currency, therefore British company will recognize sales at $32000
Hence Sales revenue of $32,000 and accounts receivables of $32,000 will be recognized by britishg company.
first option is correct.