Assume that Ariel agrees to purchase US$500,000 for C$550,000 on January 15,2013.The exchange rate at year end is US$1=C$0.95 and the January 15,2013 exchange rate is US$1=C$0.97.What journal entry is required when the contract is initiated?
A)0
B)$65,000 loss.
C)$75,000 gain.
D)$75,000 loss.

Question

Quizplus · Accepted Answer

When the contract is initiated, no journal entry is required because the transaction has not yet been realized. The exchange rates at this point only set the terms of the agreement.

Assume That Ariel Agrees to Purchase US$500,000 for C$550,000 on January