Question

Juno, a US Company, has a 100% owned subsidiary in Japan. The functional currency for the subsidiary is the Japanese yen. The Japanese subsidiary purchases merchandise on credit from a Swiss company, with payment due in US dollars. Between the date of purchase and the due date of the payable, the swiss franc strengthens against the US dollar and the Japanese yen weakens against the US dollar. What will be the result to Juno. There will be a foreign exchange loss There will be both a foreign exchange gain and loss There will be a foreign exchange gain There will be no foreign exchange gain or loss Juno will need to enter into a hedge to reduce its foreign currency exposure

Answer 1

Answer:

There will be a foreign exchange gain

Explanation:

In the given situation we can see that there should be an exposure with respect to the foreign exchange for the japanese subsidiary as it should be payable to the foreign currency i.e. in the united states dollars at the same time the functional currency is Yen

So as per the given situation, there would be the foreign exchange gain