A U.S. company buys merchandise from a foreign company denominated in U.S. dollars. Which of the following statements is true?
A) If the foreign currency appreciates, a foreign exchange gain will result.
B) If the foreign currency depreciates, a foreign exchange gain will result.
C) No foreign exchange gain or loss will result.
D) If the foreign currency appreciates, a foreign exchange loss will result.
E) Any gain or loss will be included in comprehensive income.

Question

Quizplus · Accepted Answer

Since the transaction is denominated in U.S. dollars, there is no foreign exchange risk, and thus no foreign exchange gain or loss will result.

A US Company Buys Merchandise from a Foreign Company Denominated in in U.S