Company X denominated a December 1,2009,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 unfavourably at December 31,2009,resulting in a loss that should:
A)be included as a separate component of stockholders' equity at Dec.31,2009.
B)be included as a component of income from continuing operations for 2009.
C)be included as a deferred charge at December 31,2009.
D)not be reported until January 10,2010,the settlement date.

Question

Quizplus · Accepted Answer

The loss resulting from the unfavourable exchange rate should be included as a component of income from continuing operations for 2009, as it is a realized loss that relates to the company's ongoing operations. It should not be included as a separate component of stockholders' equity, as it is not a result of a change in the company's equity, and it should not be reported as a deferred charge, as it is not an asset. The loss should be recognized at December 31, 2009, as this is the reporting date for the company's financial statements, regardless of the fact that the payment was not made until January 10, 2010.

Company X Denominated a December 1,2009,purchase of Goods in a Currency