Use the following information to answer the question(s) below.

On November 1, 2014, Rolleks Corporation sold merchandise to Watchem Corporation, a Swiss firm. Rolleks measured and recorded the account receivable from the sale at $107,100. Watchem paid for this account on November 30, 2014. Spot rates for Swiss francs on November 1 and November 30, respectively, were $1.05 and $1.02.

-If the sale of merchandise is denominated in dollars,the November 30 entry to record receipt of the payment from Watchem included a
A)credit to Accounts Receivable for $104,040.
B)credit to Exchange Gain for $3,060.
C)debit to Cash for $107,100.
D)debit to Exchange Loss for $3,060.

Question

Use the following information to answer the question(s) below.

On November 1, 2014, Rolleks Corporation sold merchandise to Watchem Corporation, a Swiss firm. Rolleks measured and recorded the account receivable from the sale at $107,100. Watchem paid for this account on November 30, 2014. Spot rates for Swiss francs on November 1 and November 30, respectively, were $1.05 and $1.02.

-If the sale of merchandise is denominated in dollars,the November 30 entry to record receipt of the payment from Watchem included a
A)credit to Accounts Receivable for $104,040.
B)credit to Exchange Gain for $3,060.
C)debit to Cash for $107,100.
D)debit to Exchange Loss for $3,060.

Quizplus · Accepted Answer

Since the sale of merchandise is denominated in dollars, the payment received will also be in dollars. Therefore, the entry would be a debit to Cash for the amount received, which is $107,100. There would be no exchange gain or loss recorded since there was no conversion of currency involved. The credit to Accounts Receivable would have been recorded when the sale was made, not when the payment was received.

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