Question - Company ABC purchased equipment worth 11.1M Euros from an Italian co at the beginning of the year. The transaction was denominated in Euros. The exchange rate at the time was US $1.40 = 1 Euro. However, due to a weaker economy, the dollar strengthened against the Euro resulting in an exchange rate of US $1.31 = 1 Euro at year end.
a) Determine the transaction gain/loss that Company ABC will report in its year-end income statement.
b) Determine the transaction gain/loss that the Italian company will report in the year-end income statement.