A year ago, MC Hammer Company had inventory in Britain valued at 240,000 pounds. The exchange rate for dollars to pounds was 1£ = 2 U. S. dollars. This year the exchange rate is 1£ = 1.82 U. S. dollars. The inventory in Britain is still valued at 240,000 pounds. What is the gain or loss in inventory value in U. S. dollars as a result of the change in exchange rates? (Hint: Gain/loss is the difference between total value of last period and current period

Question

Denise Maddox

Business

6 July, 11:42

A year ago, MC Hammer Company had inventory in Britain valued at 240,000 pounds. The exchange rate for dollars to pounds was 1£ = 2 U. S. dollars. This year the exchange rate is 1£ = 1.82 U. S. dollars. The inventory in Britain is still valued at 240,000 pounds. What is the gain or loss in inventory value in U. S. dollars as a result of the change in exchange rates? (Hint: Gain/loss is the difference between total value of last period and current period

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Answers (1)

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Emerson Martinez · Answer 1

Gain = 132,000 - 120,000 = 12,000 dollars

Explanation:

Giving the following information:

A year ago, MC Hammer Company had inventory in Britain valued at 240,000 pounds. The exchange rate for dollars to pounds was 1£ = 2 U. S. dollars. This year the exchange rate is 1£ = 1.82 U. S. dollars. The inventory in Britain is still valued at 240,000 pounds.

Year 1 = 1/2 = 0.5 exchange rate

Inventory year 1 = 240,000*0.5 = 120,000 dollars

Year 2 = 1/1.82 = 0.55 exchange rate

Inventory year 2 = 120,000*0.55 = 132,000 dollars