Assume That Lewis International Sells Running Shoes to a British

question 16

Multiple Choice

Assume that Lewis International sells running shoes to a British importer on June 1 and that the sale is denominated at £75,000 and will be collected on July 15. Assume the treatment of FASB Statement 52 and that no forward contract is entered into. Also assume that Lewis closes its books at the end of each month. The following are the relevant exchange rates.
$\begin{array}{ll}\text { Spot rate on June 1 } & \$ 1.6200 \\ \text { Forward rate for July } & \\ 15 \text { delivery } & \$ 1.6000 \\ \text { Spot rate on June 30 } & \$ 1.6100 \\ \text { Spot rate on July 15 } & \$ 1.5950\end{array}$
-Assuming the tax treatment for foreign currency transactions, what is the foreign exchange gain or loss on June 30?

• A) $ 750 loss
• B) $ 750 gain
• C) $1125 loss
• D) $1875 loss
• E) gain or loss is deferred

---

Definitions:

Federal Government

The federal government is the national government of a federation, responsible for national affairs, and typically characterized by a division of powers with regional governments.

Recession

An interval of economic deceleration, involving a fall in business and industrial activities, often recognized by a drop in GDP across two sequential quarters.

Sharp Recession

A severe and rapid downturn in economic activity.

Unemployment Rate

The fraction of the total employment market that remains without work but is eagerly searching for jobs and is willing to be employed.