Question

Jelton, Inc., is a U.S. company that has some business operations in Canada. The Canadian operation exports most of its output to the U.S., but incurs most of its costs in Canadian dollars. The budgeted income statement for next year is shown below. Jelton wants to know the impact of three possible exchange rate scenarios for the Canadian dollar on its budgeted income statement (assume one Canadian dollar is equivalent to either $0.70, $0.80, or $0.90 in U.S. dollars).


Instructions
a. Complete the chart in the working papers related to Jelton’s budgeted income statement in U.S. dollars:


b. Explain the impact of a stronger Canadian dollar on earnings beforetax.


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  • CreatedApril 17, 2014
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