Use the following information to answer the question(s)below.
On November 1,2010,Rolleks Corporation sold merchandise to Watchem Corporation,a Swiss firm.Rolleks measured and recorded the account receivable from the sale at $107,100.Watchem paid for this account on November 30,2010.Spot rates for Swiss francs on November 1 and November 30,respectively,were $1.05 and $1.02.
-On December 5,2010,Unca Corporation,a U.S.firm,bought inventory items from Skagerrak Corporation of Norway for 1,000,000 Norwegian kroner when the spot rate for kroner was $0.166.The purchase was denominated in kroner.At Unca's fiscal year end,December 31,2010,the spot rate was $0.171.On January 4,2011,Unca purchased 1,000,000 kroner for $167,500 and paid the invoice.How much gain or (loss)did Unca report in its 2010 and 2011 income statements,respectively?
A)$(5,000)and $1,500
B)$0 and ($1,500)
C)($5,000)and $3,500
D)$0 and ($3,500)

Question

Quizplus · Accepted Answer

C)
Accounts payable,Dec 05,2010
1,000,000 × $0.166 = $166,000
Accounts payable,Dec 31,2010
1,000,000 × $0.171 = $171,000
Loss = $5,000
Accounts payable,Dec 31,2010 = $171,000
Accounts payable,at settlement = $167,500
Gain = $3,500

Use the Following Information to Answer the Question(s)below