Suppose Stackpool Inc.had inventory in Britain valued at 240,000 pounds one year ago.The exchange rate for dollars to pounds was 1£ = 2 U.S.dollars.This year the exchange rate is 1£ = 1.82 U.S.dollars.The inventory in Britain is still valued at 240,000 pounds.What is the gain or loss in inventory value in U.S.dollars as a result of the change in exchange rates?
A) −$240,000
B) −$43,200
C) $0
D) $43,200
E) $47,473

Question

Quizplus · Accepted Answer

The inventory value in U.S. dollars one year ago was 240,000 pounds * 2 U.S. dollars/pound = $480,000. This year, the value is 240,000 pounds * 1.82 U.S. dollars/pound = $436,800. The loss in inventory value is $480,000 - $436,800 = $43,200.