Breanna Boutique purchased on credit $\le$50,000 worth of clothing from a British company when the exchange rate was $1.97 per British pound. At the year-end balance sheet date the exchange rate increased to $2.76. Breanna Boutique must record a:

Question

Quizplus · Accepted Answer

The increase in the exchange rate from $1.97 to $2.76 per British pound means that it now costs more dollars to pay off the same amount in pounds. The original amount in pounds is $50,000 / $1.97 = approximately 25,380 pounds. At the new rate, paying off this debt would cost 25,380 pounds * $2.76 = approximately $70,048. This is an increase of about $20,048 from the original $50,000, not the amounts listed in the options. However, the principle behind the correct answer is that Breanna Boutique would record a loss because it now requires more dollars to settle the same amount of debt in pounds. Given the options and the principle, there seems to be a misunderstanding in the calculation presented in the question. The correct approach shows there would be a loss due to the increased exchange rate, but the specific amounts given in the options do not match this calculation.

Breanna Boutique Purchased on Credit ≤\le≤ 50,000 Worth of Clothing from a British Company When the from a British

Breanna Boutique Purchased on Credit $\le$ 50,000 Worth of Clothing from a British Company When the from a British