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Rabato Corporation acquired merchandise on account from a foreign supplier on November 1, 2011, for 60,000 LCU (local currency units). It paid the foreign currency account payable on January 15, 2012. The following exchange rates for 1 LCU are known:
1-Nov-11
$0.35
31-Dec-11
0.333
15-Jan-12
0.359
a. How does the fluctuation in exchange rates affect Rabato's 2011 income statement?
b. How does the fluctuation in exchange rates affect Rabato's 2012 income statement?
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