Santa Barbara Company purchased merchandise on account from a company in England.The price was 1,000 pounds.At the time of the purchase,the exchange rate for a pound was $1.52.At the time Santa Barbara Company paid for the merchandise,the exchange rate for a pound was $1.55.What is the amount of the gain or loss recorded by the Santa Barbara Company upon payment?

Question

Quizplus · Accepted Answer

To calculate the gain or loss in a foreign currency transaction, we need to compare the exchange rates at the time of purchase and the time of payment. At the time of purchase, 1,000 pounds cost $1.52 per pound, so the total was $1,520. At the time of payment, 1,000 pounds cost $1.55 per pound, so the total was $1,550. 
To determine the gain or loss, we need to subtract the purchase price in dollars from the payment amount in dollars: 
$1,550 - $1,520 = $30 loss
Therefore, the correct answer is option B, Foreign currency transaction loss $30.

Santa Barbara Company Purchased Merchandise on Account from a Company