Foreign currency transaction

  • Creator
    Topic
  • #180725
    calicpa
    Participant

    Shouldn’t the answer be zero because the G/L results from a foreign currency transaction, not a F.C. translation?

    On October 1 of the current year, a U.S. company sold merchandise on account to a British company for 2,000 pounds (exchange rate, 1 pound = $1.43). At the company’s December 31 fiscal year end, the exchange rate was 1 pound = $1.45. The exchange rate was $1.50 on collection in January of the subsequent year. What amount would the company recognize as a gain (loss) from foreign currency translation when the receivable is collected?

    A.

    $-0-

    B.

    $100

    C.

    $140

    D.

    $(140)

    Correct!

    A foreign currency exchange gain will be recognized for the change in exchange rate between December 31 and the January collection date. That gain is computed as $1.45 -> $1.50 = $0.05 x 2,000 pounds = $100 gain.

    BEC - 84, 4/6/13
    AUD - 77, 5/28/13
    REG - 83, 4/12/14
    FAR - 83, 10/3/13

    Ethics - 90% 4/24/13

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  • Author
    Replies
  • #455556
    RTFQ
    Member

    F.C Transactions are on the I/S, and the Translations are on OCI. I think….. FAR in 7 days, my mind is going blurry…

    B- May 2014
    A- 96
    R- 90
    F- 90

    #455698
    RTFQ
    Member

    F.C Transactions are on the I/S, and the Translations are on OCI. I think….. FAR in 7 days, my mind is going blurry…

    B- May 2014
    A- 96
    R- 90
    F- 90

Viewing 2 replies - 1 through 2 (of 2 total)
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