On November 12,Higgins,Inc. ,a U.S.Company,sold merchandise on credit to Kagome of Japan at a price of 1,500,000 yen.The exchange rate was $0.00837 on the date of sale.On December 31,when Higgins prepared its financial statements,the exchange rate was $0.00843.Kagome paid in full on January 12,when the exchange rate was $0.00861.On January 12,Higgins should prepare the following journal entry:

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To record the payment received from Kagome on January 12, Higgins should debit Cash for the amount received, which is $12,915 (1,500,000 yen x $0.00861). However, the amount recorded in Accounts Receivable at the time of the sale was based on the exchange rate on November 12, which was $0.00837. Therefore, the credit to Accounts Receivable-Kagome should be based on that rate, which gives us a credit of $12,645 (1,500,000 yen x $0.00837). The difference between the two rates results in a Foreign Exchange Gain of $270 ([$12,915 - $12,555] - [$12,645 x ($0.00843 - $0.00837)]). Therefore, Higgins should prepare the journal entry as follows: 
Debit Cash $12,915; credit Accounts Receivable-Kagome $12,645; credit Foreign Exchange Gain $270.