Wild, Inc.sold merchandise for 500,000 FC to a foreign vendor on November 30, 2020.Payment in foreign currency is due January 31, 2021.Exchange rates to purchase 1 foreign currency unit are as follows: ?

$$\begin{array} { l r r r }
& \text { Nov. } 30,2020 & \text { Dec. } 31,2020 & \text { Jan. } 31,2021 \
\text { Spot } & \$ 1.49 & \$ 1.45 & \$ 1.44 \
30 \text { day } & \$ 1.48 & \$ 1.43 & \$ 1.43 \
60 \text { day } & \$ 1.46 & \$ 1.41 & \$ 1.42
\end{array}$$ In the year in which the sale was made, 2020, what amount should Wild report as foreign exchange gain/loss from this transaction?

Question

Wild, Inc.sold merchandise for 500,000 FC to a foreign vendor on November 30, 2020.Payment in foreign currency is due January 31, 2021.Exchange rates to purchase 1 foreign currency unit are as follows: ?

$$\begin{array} { l r r r } 
& \text { Nov. } 30,2020 & \text { Dec. } 31,2020 & \text { Jan. } 31,2021 \
\text { Spot } & \$ 1.49 & \$ 1.45 & \$ 1.44 \
30 \text { day } & \$ 1.48 & \$ 1.43 & \$ 1.43 \
60 \text { day } & \$ 1.46 & \$ 1.41 & \$ 1.42
\end{array}$$ In the year in which the sale was made, 2020, what amount should Wild report as foreign exchange gain/loss from this transaction?

Quizplus · Accepted Answer

To determine the foreign exchange gain/loss, we need to compare the exchange rate on the date of the sale (November 30, 2020) with the exchange rate on the date of payment (January 31, 2021).
On November 30, 2020:
500,000 FC x 0.024 = $12,000

On January 31, 2021:
500,000 FC x 0.023 = $11,500

Therefore, the foreign exchange loss is $500, or $20,000 FC (500 x 40 FC/USD exchange rate). Therefore, the correct answer is B.

Wild, Incsold Merchandise for 500,000 FC to a Foreign Vendor on on November