Winston Corp

question 57

Multiple Choice

Winston Corp., a U.S. company, had the following foreign currency transactions during 2013:
(1) ) Purchased merchandise from a foreign supplier on July 16, 2013 for the U.S. dollar equivalent of $47,000 and paid the invoice on August 3, 2013 at the U.S. dollar equivalent of $54,000.
(2) ) On October 15, 2013 borrowed the U.S. dollar equivalent of $315,000 evidenced by a non-interest-bearing note payable in euros on October 15, 2013. The U.S. dollar equivalent of the note amount was $295,000 on December 31, 2013, and $299,000 on October 15, 2014.
What amount should be included as a foreign exchange gain or loss from the two transactions for 2014?

• A) $1,000 loss.
• B) $1,000 gain.
• C) $2,000 loss.
• D) $4,000 gain.
• E) $4,000 loss.

---

Definitions:

Departmental Overhead Rates

Specific overhead rates applied to different departments within a company, calculated to allocate overhead costs more accurately.

Overreliance On Volume

The high dependency on sales volume to drive profit, risking profitability if volume decreases.

Overhead Applied

The allocation of manufacturing overhead to individual products or job orders based on a predetermined rate.

Actual Activity

The real measure of the volume of production or operation activities undertaken by a company within a specified period.