Assume That RadCo International Purchases Ski Equipment on Account from a German

question 6

Multiple Choice

Assume that RadCo International purchases ski equipment on account from a German exporter on October 1 and that the sale is denominated in 500,000 German marks. RadCo closes its books at the end of each month, and the payable is due on November 15. The following are the relevant exchange rates.
$\begin{array}{lr}\text { Spot rate on October 1 } & \$ 0.5939 \\ \text { Forward rate for Nov 15 delivery } & \$ 0.5945 \\ \text { Spot rate on October 31 } & \$ 0.5948 \\ \text { Spot rate on Nov 15 } & \text { S0.5941 }\end{array}$

Questions 34-38 assumes the treatment of FASB Statement 52 and that no forward contract is entered into.
-What is the amount of the foreign exchange gain or loss that it will recognize on October 31?

• A) $300 loss
• B) $450 loss
• C) $450 gain
• D) $150 loss
• E) gain or loss is deferred

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