Alpha, Inc., a U.S.company, had a receivable from a customer that was denominated in Mexican pesos.On December 31, 2017, this receivable for 75,000 pesos was correctly included in Alpha's balance sheet at $8,000.The receivable was collected on March 2, 2018, when the U.S.equivalent was $6,900.How much foreign exchange gain or loss will Alpha record on the income statement for the year ended December 31, 2018?
A) $1,100 loss.
B) $1,100 gain.
C) $6,900 loss.
D) $6,900 gain.
E) $8,000 gain.

Question

Quizplus · Accepted Answer

To calculate the foreign exchange gain or loss, we need to compare the U.S. dollar value of the receivable on the balance sheet date ($8,000) with the U.S. dollar value of the cash received on the collection date ($6,900).

The difference between these two amounts is a foreign exchange loss for Alpha, Inc.:

$8,000 - $6,900 = $1,100 loss

Therefore, the correct answer is A) $1,100 loss.