Assume That Ariel Agrees to Purchase US$500,000 for C$550,000 on January

question 35

Multiple Choice

Assume that Ariel agrees to purchase US$500,000 for C$550,000 on January 15,2013.The exchange rate at year end is US$1=C$0.95 and the January 15,2017 exchange rate is US$1=C$0.97.What journal entry is required when the contract is initiated?

• A)0
• B)$65,000 loss.
• C)$75,000 gain.
• D)$75,000 loss.

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Definitions:

Implied Contract

An agreement created by actions of the parties involved, rather than written or spoken words, which has the same legal force as a written contract.

Executed Contract

A contract in which all parties involved have fulfilled their obligations as outlined in the agreement.

Executory Contract

A contract that has not yet been fully performed.

Executory

Executory refers to a contract or agreement in which some future act or obligation remains to be performed under its terms.