Winston Corp

question 91

Multiple Choice

Winston Corp., a U.S. company, had the following foreign currency transactions during 2021:(1.) Purchased merchandise from a foreign supplier on July 16, 2021 for the U.S. dollar equivalent of $47,000 and paid the invoice on August 3, 2021 at the U.S. dollar equivalent of $54,000.(2.) On October 15, 2021 borrowed the U.S. dollar equivalent of $315,000 evidenced by a non-interest-bearing note payable in euros on October 15, 2022. The U.S. dollar equivalent of the note amount was $295,000 on December 31, 2021, and $299,000 on October 15, 2022.What amount should be included as a foreign exchange gain or loss from the two transactions for 2022?

• A) $1,000 loss.
• B) $1,000 gain.
• C) $2,000 loss.
• D) $4,000 gain.
• E) $4,000 loss.

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Definitions:

Discounting

The process of determining the present value of a payment or a stream of payments that is to be received in the future.

Compounding

The process whereby interest is added to the principal sum, so that from that moment on, the interest that has been added also earns interest.

Demand Curve

A graph representing the relationship between the price of a good and the quantity demanded, with price on the vertical axis and quantity on the horizontal axis.

Loanable Funds

The money available for borrowing in the financial markets, determined by savings and investments.