Assume that Signh agrees to purchase US$100,000 for C$84,745 on January 15,2013.The exchange rate at year end is US$1 = C$1.20 and the January 15,2013 exchange rate is US$1 = C$1.19.What journal entry is required at January 15,2013?
A)$701 loss.
B)$701 gain.
C)$711 loss.
D)$711 gain.

Question

Quizplus · Accepted Answer

The correct answer is B because the company gains $701 from the transaction. The company purchased US$100,000 for C$84,745, which means that the company paid C$0.84745 for each US dollar. At the year-end exchange rate of US$1 = C$1.20, the company could sell the US$100,000 for C$120,000. This means that the company would gain C$35,255 (C$120,000 - C$84,745) from the transaction.

Assume That Signh Agrees to Purchase US$100,000 for C$84,745 on January