Assume That Lewis International Sells Running Shoes to a British

question 53

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. Also assume that Lewis closes its books at the end of each month. The following are the relevant exchange rates.
$\begin{array}{ll}\text { Spot rate on June 1 } & \$ 1.6200 \\ \text { Forward rate for July } & \\ \text { 15 delivery } & \$ 1.6000 \\ \text { Spot rate on June 30 } & \$ 1.6100 \\ \text { Spot rate on July 15 } & \$ 1.5950\end{array}$

For questions 25-29, assume FASB Statement 52 treatment and that Lewis enters into a forward contract.
-The difference between the spot rate on June 1 and the forward rate is a

• A) $375 foreign exchange gain
• B) $375 foreign exchange loss
• C) $1500 foreign exchange loss
• D) $1500 foreign exchange gain

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