Mint Corporation Has Several Transactions with Foreign Entities

question 13

Multiple Choice

Mint Corporation has several transactions with foreign entities.Each transaction is denominated in the local currency unit of the country in which the foreign entity is located.On October 1,20X8,Mint purchased confectionary items from a foreign company at a price of LCU 5,000 when the direct exchange rate was 1 LCU = $1.20.The account has not been settled as of December 31,20X8,when the exchange rate has decreased to 1 LCU = $1.10.The foreign exchange gain or loss on Mint's records at year-end for this transaction will be:

• A)$500 loss
• B)$500 gain
• C)$378 gain
• D)$5,500 loss

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Definitions:

OEM Recommendations

Guidelines or advice given by the Original Equipment Manufacturer regarding the maintenance, use, or repair of their product.

Contribution Margin

The amount by which the sales of a product or service exceed the variable costs associated with its production, contributing towards covering fixed costs and generating profit.

Depreciation Expense

The allocated portion of the total cost of a company's physical assets that is expensed out on the income statement over a set period, reflecting the asset's consumption and wear and tear.

Fixed Costs

Costs that do not change with the level of production or sales, including expenses like rent, salaries, and insurance.