During the current year Ortiz Industries purchased 24,000 euros €) on June 1.The company still held the euros on December 31, the company's year-end.Exchange rates during the year were: $$\begin{array} { l l }
\text { Jan. } 1 & € 1.00 = \$ 1.45 \
\text { June } 1 & € 1.00 = \$ 1.37 \
\text { Dec. } 31 & € 1.00 = \$ 1.39
\end{array}$$
The gain or loss in terms of Canadian dollars that will appear on the income statement is:
A)$900 gain
B)$480 gain
C)$1,200 loss
D)$900 loss

Question

During the current year Ortiz Industries purchased 24,000 euros €) on June 1.The company still held the euros on December 31, the company's year-end.Exchange rates during the year were: $$\begin{array} { l l } 
\text { Jan. } 1 & € 1.00 = \$ 1.45 \
\text { June } 1 & € 1.00 = \$ 1.37 \
\text { Dec. } 31 & € 1.00 = \$ 1.39
\end{array}$$
The gain or loss in terms of Canadian dollars that will appear on the income statement is:
A)$900 gain
B)$480 gain
C)$1,200 loss
D)$900 loss

Quizplus · Accepted Answer

The gain is calculated based on the difference in exchange rates from the time of purchase to the year-end. Ortiz Industries purchased euros at a rate of $1.37 and held them until the rate was $1.39. The gain is calculated as (€24,000 * $1.39) - (€24,000 * $1.37) = $33,360 - $32,880 = $480 gain.