How much Foreign Exchange Gain or Loss should Brisco record on May 31?
A) $2,520,000 gain.
B) $ 20,000 gain.
C) $ 20,000 loss.
D) $ 80,000 gain.
E) $ 80,000 loss.

Question

Quizplus · Accepted Answer

The foreign currency payable was originally recorded at $640,000 (CAD 800,000 x $0.80), and as of May 31, the CAD had weakened to $0.79. Therefore, the liability is effectively cheaper in USD terms and Brisco would record a foreign exchange loss. The loss is calculated as follows: CAD 800,000 x ($0.80 - $0.79) = CAD 800, which is equivalent to $20,000 USD (CAD 800 x 1 USD/ CAD 0.04). Therefore, the correct answer is C, $20,000 loss.

How Much Foreign Exchange Gain or Loss Should Brisco Record