Asked by kiona brown on May 01, 2024
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On July 1, 2020, CANCO purchased inventory from its main U.S. supplier, RNB Enterprises, at a cost of US$12,000. CANCO's year end is on July 31. Payment of US$12,000 for the inventory is due on August 31, 2020. Some important dates regarding this transaction, as well as the exchange rates in effect at each of these dates are shown below:
Trarsaction date: July 1,2020: 1 U.S. Dollar = CDN 1.370 Year end July 31,2020: 1 U.S. Dollar = CDN $1.345 Setternent date: August 31,2020: 1 U.S. Dollar = CDN $1.325\begin{array} { | l | l | l } \hline \text { Trarsaction date: July } 1,2020 : & \text { 1 U.S. Dollar } = \text { CDN } 1.370 \\\hline\text { Year end July } 31,2020 : & \text { 1 U.S. Dollar } = \text { CDN } \$ 1.345 \\\hline \text { Setternent date: August } 31,2020 : & \text { 1 U.S. Dollar } = \text { CDN } \$ 1.325 \\\hline\end{array} Trarsaction date: July 1,2020: Year end July 31,2020: Setternent date: August 31,2020: 1 U.S. Dollar = CDN 1.370 1 U.S. Dollar = CDN $1.345 1 U.S. Dollar = CDN $1.325 What would be the amount of the foreign exchange gain or loss recorded at the settlement date?
A) A CDN$300 exchange loss.
B) A CDN$240 exchange gain.
C) A CDN$300 exchange gain.
D) Nil. Any exchange gain or loss is deferred until settlement.
Foreign Exchange Gain
Profit arising from the appreciation of a foreign currency relative to the functional currency in foreign currency transactions.
Settlement Date
The date on which a trade or financial transaction must be completed, with the transfer of the asset and payment.
Year End
The end of a fiscal year or accounting period, at which time companies close books and prepare financial statements.
- Identify and keep a record of foreign exchange variances as gains or losses at the year's end and during settlement.
Verified Answer
Learning Objectives
- Identify and keep a record of foreign exchange variances as gains or losses at the year's end and during settlement.
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