Parker Corp

question 45

Multiple Choice

Parker Corp., a U.S. company, had the following foreign currency transactions during 2021:(1.) Purchased merchandise from a foreign supplier on July 5, 2021 for the U.S. dollar equivalent of $80,000 and paid the invoice on August 3, 2021 at the U.S. dollar equivalent of $82,000.(2.) On October 1, 2021 borrowed the U.S. dollar equivalent of $872,000 evidenced by a non-interest-bearing note payable in euros on October 1, 2022. The U.S. dollar equivalent of the note amount was $860,000 on December 31, 2021, and $881,000 on October 1, 2022.What amount should be included as a foreign exchange gain or loss from the two transactions for 2021?

• A) $2,000 loss.
• B) $2,000 gain.
• C) $10,000 gain.
• D) $14,000 loss.
• E) $14,000 gain.

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Definitions:

Variable Expenses

Costs that vary in proportion to the level of activity or volume of goods produced.

Management Accounting

The field of accounting aimed at providing managers within the company with the financial information necessary to make informed business decisions.

Depreciation Expense

The systematic allocation of the cost of a tangible asset over its useful life.

Operating Expenses

Costs associated with the day-to-day operations of a business, excluding the cost of goods sold.