If the European subsidiary of a U.S. firm has net exposed assets of €200,000, and the euro increases in value from $1.22/€ to $1.26/€ the U.S. firm has a translation:
A) gain of $8,000.
B) loss of $8,000.
C) gain of $252,000.
D) loss of €252,000.

Question

Quizplus · Accepted Answer

The gain is calculated based on the increase in the value of the euro against the dollar. Initially, the assets were worth $244,000 (200,000 * 1.22). After the increase, they are worth $252,000 (200,000 * 1.26). The difference, or gain, is $8,000.

If the European Subsidiary of a U