Note: This Is a Kaplan CPA Review Question

question 33

Multiple Choice

Note: This is a Kaplan CPA Review Question
On September 1, 20X1, Bain Corp. received an order for equipment from a foreign customer for 300,000 local currency units (LCU) when the U.S. dollar equivalent was $96,000. Bain shipped the equipment on October 15, 20X1, and billed the customer for 300,000 LCU when the U.S. dollar equivalent was $100,000. Bain received the customer's remittance in full on November 16, 20X1, and sold the 300,000 LCU for $105,000. In its income statement for the year ended December 31, 20X1, Bain should report a foreign exchange gain of

• A) $9,000
• B) $4,000
• C) $0
• D) $5,000

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Definitions:

Normal Profit

Normal profit occurs when a firm's total revenue is equal to its total costs, including the opportunity costs of capital, providing no incentive for entry or exit in the industry.

Yearly Licensing Fee

An annual charge paid to obtain the rights to use a particular piece of intellectual property, software, or other specific products/services.

Market Price

The ongoing rate at which an asset or service is offered for buying or selling in a certain market.

Short Run

A period in economics during which at least one input or resource is fixed, limiting immediate capacity adjustments.