The Following Information Pertains to Questions

question 37

Multiple Choice

The following information pertains to questions
XYZ Corp has a calendar year end.On January 1,2010,the company borrowed $5,000,000 U.S.dollars from an American Bank.The loan is to be repaid on December 31,2013 and requires interest at 5% to be paid every December 31.The loan and applicable interest are both to be repaid in U.S.dollars.XYZ does not hedge to minimize its foreign exchange risk.
The following exchange rates were in effect throughout the term of the loan: The average rates in effect for 2010 and 2011 were as follows:
-What is the amount of foreign exchange gain or loss recognized on the 2011 Income Statement?

• A)$800 gain
• B)$800 loss
• C)$2,500 gain
• D)$2,500 loss

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Definitions:

European Population Growth

The change in the number of individuals living in Europe, influenced by birth rates, death rates, and migration.

Economic Growth

An increase in the production of goods and services in an economy over a period of time, often measured by GDP.

Invested

The act of allocating money or resources to an endeavor with the expectation of generating income or profit.

Bank

A financial institution licensed to accept deposits, offer loans, and provide other financial services such as currency exchange.