XYZ Corp Has a Calendar Year End The Average Rates in Effect for 2019 and 2020 Were

question 21

Multiple Choice

XYZ Corp. has a calendar year end. On January 1, 2019, the company borrowed $5,000,000 U.S. dollars from an American Bank. The loan is to be repaid on December 31, 2022 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:
$$\begin{array} { | l | l | } \hline \text { Jaruary } 1,2019 & \text { US } \$ 1 = \text { CDN } \$ 1.1500 \\\hline \text { Decernber } 31,2019 & \text { US } \$ 1 = \text { CDN } \$ 1.1490 \\\hline \text { December } 31,2020 & \text { US } \$ 1 = \text { CDN } \$ 1.1485 \\\hline \text { December } 31,2021 & \text { US } \$ 1 = \text { CDN } \$ 1.1483 \\\hline \text { December } 31,2022 & \text { US } \$ 1 = \text { CDN } \$ 1.1487 \\\hline\end{array}$$ The average rates in effect for 2019 and 2020 were as follows:
$$\begin{array} { | l | c | } \hline2019 : & \text { US } \$ 1 = \text { CDN } \$ 1.1493 \\\hline 2020 : & \text { US } \$ 1 = \text { CDN } \$ 1.1487 \\\hline\end{array}$$ What is the amount of foreign exchange gain or loss recognized on the 2020 Income Statement as a result of revaluing the loan payable?

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

---

Definitions:

Norm-Referenced Performance Appraisals

A method of evaluating performance by comparing an individual's performance to the performance of others in a similar context.

Upward Appraisal

A feedback process in which employees evaluate the performance of their supervisors or managers, contributing to performance reviews.

MBO System

Management by Objectives; a strategic management model where goals are defined for each employee and their performance is assessed based on those predefined objectives.

Graphics Rating Scale

A performance appraisal method using a scale to visually represent employee performance levels across various categories.