Phan Ltd, a Canadian Company, Sold Goods to a Foreign Customer

question 5

Multiple Choice

Phan Ltd., a Canadian company, sold goods to a foreign customer for 1,000,000 foreign currency (FC) units, which was equivalent to $500,000 CAD. By the time the customer paid Phan, the exchange rates had changed and 1,000,000 FC units was equivalent to $515,000 CAD. How should the resulting $15,000 CAD difference between the sale and payment dates be treated?

• A)As an increase in sales
• B)As a decrease to cost of sales
• C)As a realized gain
• D)As an unrealized gain

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Definitions:

Loss Aversion

A cognitive bias where individuals fear losses more than they value equivalent gains.

Company Retirement

Often related to the benefits or pension schemes planned for employees after they retire from a company, differing from mandatory retirement policies.

Savings Programs

Financial plans or accounts that encourage saving by offering interest or other benefits.

Neoclassical Models

Economic models based on the principles of neoclassical economics that emphasize rational behavior, supply and demand equilibrium, and the efficiency of markets.