Company X denominated a December 1,20X9,purchase of goods in a currency other than its functional currency.The transaction resulted in a payable fixed in terms of the amount of foreign currency,and was paid on the settlement date,January 10,2010.Exchange rates moved unfavorably at December 31,20X9,resulting in a loss that should:
A)be included as a separate component of stockholders' equity at Dec.31,20X9.
B)be included as a component of income from continuing operations for 20X9.
C)be included as a deferred charge at December 31,20X9.
D)not be reported until January 10,2010,the settlement date.

Question

Quizplus · Accepted Answer

The loss resulting from the unfavorable exchange rates should be included as a component of income from continuing operations for 20X9 because it is directly related to a transaction that is part of the company's normal business operations. It should not be reported as a separate component of stockholders' equity or as a deferred charge since it does not meet the criteria for those categories. Additionally, it should be recognized at the end of the accounting period, which is December 31, 20X9, and not at the settlement date in January 2010.

Company X Denominated a December 1,20X9,purchase of Goods in a Currency