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

$\begin{aligned}
\text { Inventory, this year }=240,000 £ \times \$ 1.82 &=& \$ 436,800 \
\text { Inventory, last year }=240,000 £ \times \$ 2.00 &=&  480,000 \
\text { Loss } &=&(\$ 43,200)
\end{aligned}$