Assume that Millan 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 year end?
A)$701 loss.
B)$701 gain.
C)$711 loss.
D)$711 gain.

Question

Quizplus · Accepted Answer

To determine the gain or loss, we need to compare the exchange rate at the time of purchase (US$1 = C$1.19) to the exchange rate at year end (US$1 = C$1.20).

The calculation is: 
C$84,745 / 1.19 = US$71,218.49 (amount paid in USD at time of purchase)
US$71,218.49 x 1.20 = C$85,462.19 (value in CAD at year end)
C$85,462.19 - C$84,745 = C$717.19 loss

Therefore, the required journal entry would be to record a loss of C$711 (rounded to the nearest dollar). So, the correct answer is C.

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