Foreign Currency

FAR — Financial Accounting and Reporting · 5 questions

Key Takeaways

Covers foreign currency transaction accounting and translation of foreign subsidiary financial statements.
Includes the treatment of translation gains and losses in the financial statements.

foreign currency1 / 5

Question 1Easy

A U.S. company purchases inventory from a foreign supplier on account for 100,000 euros when the exchange rate is 1 euro = $1.20. At year-end, the exchange rate has changed to 1 euro = $1.25. What is the amount of the foreign exchange gain or loss?

A.$5,000 foreign exchange gainB.$5,000 foreign exchange lossC.$120,000 foreign exchange gainD.No gain or loss is recorded

Select an answer and check it