Assume that on January 15, 2021 Aero's agrees to purchase US$50,000 for C$52,000 for delivery on January 15, 2022. The exchange rate at Aero's December 31 year-end is US$1 = C$.98 and the January 15, 2022 exchange rate is US$1 = C$.97. What is the foreign exchange gain or loss recognized at December 31, 2021?
A)$3,000 loss.
B)$3,000 gain.
C)$3,500 loss.
D)$3,500 gain.

Question

Quizplus · Accepted Answer

The foreign exchange loss is calculated as the difference between the exchange rate at the end of the year and the exchange rate at the date of the contract. In this case, the exchange rate at the end of the year is US$1 = C$.98 and the exchange rate at the date of the contract is US$1 = C$.97. Therefore, the foreign exchange loss is US$50,000 * (C$.98 - C$.97) = C$500.

Assume That on January 15, 2021 Aero's Agrees to Purchase