Mint Corporation Has Several Transactions with Foreign Entities

question 30

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 1,2008,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 31,2008,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

---

Definitions:

Short Run

A period in economics during which at least one factor of production is fixed and cannot be changed.

Monopolistic Competitor

A firm that operates in a market with many competitors but differentiates its product from others, giving it some control over its price.

Short Run

Describes a period in economics where at least one factor of production is fixed and cannot be changed, limiting the adjustments a firm can make to its output.

Economic Profits

The surplus left to a business after deducting all costs, including opportunity costs, from its total revenues.