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Clark, Inc. (a U.S.-based company), imports surfboards from a supplier in Brazil and sells them...

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Accounting

Clark, Inc. (a U.S.-based company), imports surfboards from a supplier in Brazil and sells them in the United States. Purchases are denominated in terms of the Brazilian real (BRL). During 2020, Clark acquires 290 surfboards at a price of BRL 1,600 per surfboard, for a total of BRL 464,000.00. Clark will pay for the surfboards when it sells them. Relevant exchange rates are as follows:

Date

U.S. Dollar per Brazilian Real (BRL)

September 1, 2020

$

0.220

December 1, 2020

0.210

December 31, 2020

0.230

March 1, 2021

0.215

  1. Assume that Clark acquired the surfboards on September 1, 2020, and made payment on December 1, 2020. What is the effect of the exchange rate fluctuations on reported income in 2020?
  2. Assume that Clark acquired the surfboards on December 1, 2020, and made payment on March 1, 2021. What is the effect of the exchange rate fluctuations on reported income in 2020 and 2021?
  3. Assume that Clark acquired the surfboards on September 1, 2020, and made payment on March 1, 2021. What is the effect of the exchange rate fluctuations on reported income in 2020 and in 2021?

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