On January 1, 2020, Canadian Music International (CMI), a manufacturer of high-end recording equipment based in Toronto, shipped US$120,000 worth of inventory to its main U.S. distributor in Chicago, with full payment of these goods due by February 28, 2020. CMI has a January 31 year end. A list of significant dates and exchange rates is shown below. $\begin{array}{|l|l|}
\hline \text { Transaction Date: January 1, 2020 } & \text { US \$1= CDN \$1.141 } \
\hline \text { Year-End Date: January 31, 2020 } & \text { US \$1=CDN } \$ 1.142 \
\hline \text { SettlementDate: February 28,2020 } & \text { US } \$ 1=\text { CDN } \$ 1.145\\hline
\end{array}$ The invoice price billed by CMI was US$120,000.
What is the amount of CMI's foreign exchange gain or loss on February 28th?

Question

Quizplus · Accepted Answer

The foreign exchange gain is calculated based on the difference between the exchange rate at the time of the transaction and the exchange rate at the time of settlement. The initial value of the transaction in Canadian dollars is US$120,000 * CDN$1.141 = CDN$136,920. The value at the time of settlement is US$120,000 * CDN$1.145 = CDN$137,400. The difference, CDN$137,400 - CDN$136,920, equals a CDN$480 gain.

On January 1, 2020, Canadian Music International (CMI), a Manufacturer