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Question
On December 1, 2011, A U.S. company sold merchandise to a foreign company for 750,000 francs. The payment in francs is due on January 31, 2012. The spot rate was as follows: $.20 per franc on December 1, 2011; $.19 per franc on December 31, 2011; and $.21 per franc on January 31, 2012 when the payment was received. Which of the following incorrectly describes the accounting for this foreign currency transaction?
A. The receivable was recorded at $150,000 on December 1, 2011.
B. The receivable was recorded at $142,500 on the December 31, 2011 balance sheet.
C. The foreign currency transaction gain included on the income statement for the year ending December 31, 2011 was $7,500.
D. The foreign currency transaction gain included on the income statement for the year ending December 31, 2012 was $15,000.
Answer
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