A US-Based Company Sells Merchandise on Account to a Company in in Mexico

question 63

Multiple Choice

A U.S.-based company sells merchandise on account to a company in Mexico. The Mexican company wants to pay for the merchandise in pesos. If the peso decreases in value relative to the dollar, the seller will record a ________. The peso ________ relative to the dollar.

• A)Foreign Currency Transaction Gain; weakens
• B)Foreign Currency Transaction Gain; strengthens
• C)Foreign Currency Transaction Loss; weakens
• D)Foreign Currency Transaction Loss; strengthens

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Definitions:

Consideration

In contract law, consideration refers to something of value exchanged between parties as part of an agreement.

Preexisting Duty

A duty that already exists under contract law, which cannot be used as consideration for a new promise or contract.

Contract

A legally enforceable agreement between two or more parties with mutual obligations.

Consideration

The value (which could be in the form of goods, services, or money) exchanged between parties in a contract, making the agreement legally binding.