Question

Let’s suppose you (USA dealer) imported one Earth Equipment machine from German dealer on March 1, 2017 at € 300,000 each, payable in 30 days. The exchange rate on March 1, 2017 was 1.16 US$/€. Then you sold the machine in the US market at US$350,000 in cash on March 29, 2017. On April 1, 2017, you paid to Italian car dealer at the exchange rate of 1.19 US$/€. What was profit or loss from this business in terms of US$? (Please assume all costs are included in price.)

Answer 1

Answer:

Loss of $7,000

Explanation:

Cost Price of the Machine

In Germany=€300,000

Exchange Rate on March 1, 2017 was 1.16 US$/€

Cost Price in USA=300,000 X 1.16

=$348000

Selling Price of the Machine

= US$350,000

Amount Paid to the dealer on April 1, 2017 at an Exchange Rate of 1.19 US$/€.

=€300,000X 1.19

=$357,000

Since the Cost Price is greater than the Selling Price,

Loss= C.P - S.P.

Loss =357,000-350000 =$7000.

The dealer made a loss of $7,000.