Mills Inc. had a receivable from a foreign customer that is due in the local currency of the customer (stickles). On December 31, 2010, this receivable for §200,000 was correctly included in Mills' balance sheet at $132,000. When the receivable was collected on February 15, 2011, the U.S. dollar equivalent was $144,000. In Mills' 2011 consolidated income statement, how much should have been reported as a foreign exchange gain?
A) $0.
B) $36,000.
C) $48,000.
D) $10,000.
E) $12,000.

Question

Quizplus · Accepted Answer

The foreign exchange gain is calculated as the difference between the amount at which the receivable was initially recorded ($132,000) and the amount collected ($144,000), resulting in a gain of $12,000.

Mills Inc Had a Receivable from a Foreign Customer That Is