Note: This Is a Kaplan CPA Review Question

question 57

Multiple Choice

Note: This is a Kaplan CPA Review Question
Hunt Co. purchased merchandise for 300,000 British pounds from a vendor in London on November 30, 20X1. Payment in British pounds was due on January 30, 20X2. The exchange rates to purchase one pound were as follows:
In its December 31, Year One, income statement, what amount should Hunt report as foreign exchange gain?

• A) $9,000
• B) $12,000
• C) $6,000
• D) $0

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Definitions:

Acid-Test Ratio

A liquidity ratio that measures a company's ability to pay off its current liabilities with quick assets (cash, marketable securities, and receivables).

Accounts Receivable

Money owed to a company by its customers for products or services that have been delivered but not yet paid for.

Inventory

The total amount of goods and materials held by a company for the purpose of resale or production.

Current Ratio

A financial ratio that gauges a firm's capacity to meet its short-term debts or obligations due within the next year.