Barter Corp sold American telecommunications equipment to a

Barter Corp. sold American telecommunications equipment to a British company for 740,000 pounds. On the sale date, the exchange rate was $1.65 per British pound, but when Barter received payment from its customer, the exchange rate was $1.60 per pound. When the foreign receivable was collected, Barter Enterprises:

Multiple Choice Debited Cash for $37,000.

Credited Gain on Fluctuation of Foreign Currency for $37,000.

Debited Loss on Fluctuation of Foreign Currency for $37,000.

Credited Sales for $37,000.

Can you please show the work. thank you.

Solution

ANSWER = Debited Loss on Fluctuation of Foreign Currency for $37,000.

Exchnage rate on date of sale = $1.65

Exchange rate on date of payment = $1.60

When the foreign receivable was collected, Barter Enterprises bebited Loss on Fluctuation of Foreign Currency for

= (?740,000 x $1.60) - (?740,000 x $1.65)

= $37,000 loss