Ryan Company borrow $45,000 US when the exchange rate for US $1.00 is Cdn.$1.46.When the debt was repaid the exchange rate changes to US $1.00 = Cdn.$1.38.Ryan Company records the amount on the date of exchange as:
A)A foreign exchange gain of $3,600.
B)A foreign exchange gain of $62,100.
C)A foreign exchange loss of $3,600.
D)A foreign exchange loss of $62,100.

Question

Quizplus · Accepted Answer

When the debt was incurred, $45,000 US would convert to $45,000 * 1.46 = $65,700 Cdn. Upon repayment, if the exchange rate is $1.00 US = $1.38 Cdn, then $45,000 US would convert to $45,000 * 1.38 = $62,100 Cdn. The difference between $65,700 and $62,100 is $3,600, which represents a foreign exchange gain because less Canadian dollars are needed to repay the US dollar debt.

Ryan Company Borrow $45,000 US When the Exchange Rate for US