_____ Paxco has a British subsidiary, Saxco. On 12/31/05, Paxco concluded that the pound would strengthen during the remainder of 2006. On this date, Saxco's balance sheet in pounds was as follows:
Saxco's functional currency is the U.S. dollar. On 12/31/05, Paxco entered into a 12-month FX forward to buy 300,000 pounds at the forward rate of $.82 (the spot rate at the time was $.80). On 12/31/06, Paxco settled the FX forward when the spot rate was $.75. What is the net amount Paxco reports in its FX Gain or Loss account (that includes the remeasurement gain or loss) for 2006?
A) No net gain or loss.
B) $6,000 net loss.
C) $6,000 net gain.
D) $21,000 loss.
E) $37,000 loss.

Question

_____ Paxco has a British subsidiary, Saxco. On 12/31/05, Paxco concluded that the pound would strengthen during the remainder of 2006. On this date, Saxco's balance sheet in pounds was as follows:
 Saxco's functional currency is the U.S. dollar. On 12/31/05, Paxco entered into a 12-month FX forward to buy 300,000 pounds at the forward rate of $.82 (the spot rate at the time was $.80). On 12/31/06, Paxco settled the FX forward when the spot rate was $.75. What is the net amount Paxco reports in its FX Gain or Loss account (that includes the remeasurement gain or loss) for 2006?
A) No net gain or loss. 
B) $6,000 net loss. 
C) $6,000 net gain. 
D) $21,000 loss. 
E) $37,000 loss.

Quizplus · Accepted Answer

The Answer of _____ Paxco has a British subsidiary, Saxco. On 12/31/05, Paxco concluded that the pound would strengthen during the remainder of 2006. On this date, Saxco's balance sheet in pounds was as follows:
 Saxco's functional currency is the U.S. dollar. On 12/31/05, Paxco entered into a 12-month FX forward to buy 300,000 pounds at the forward rate of $.82 (the spot rate at the time was $.80). On 12/31/06, Paxco settled the FX forward when the spot rate was $.75. What is the net amount Paxco reports in its FX Gain or Loss account (that includes the remeasurement gain or loss) for 2006?
A) No net gain or loss. 
B) $6,000 net loss. 
C) $6,000 net gain. 
D) $21,000 loss. 
E) $37,000 loss.

_____ Paxco Has a British Subsidiary, Saxco