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loud: × s/Nc ugradS.gcu.edu learningPlatform user users.html?operation=loggedlnenearningPlatform quiz studenth On November 1, 2017, National Company sold inventory to a foreign customer. The account will be settled on March 1 with the receipt of 200,000 foreign currency units (FCU). On November 1, National also entered into a forward contract to hedge the exposed asset. The forward rate is $0.80 per unit of foreign currency. National has a December 31 fiscal year-end. Spot rates on relevant dates were: What will be the adjusted balance in the Accounts Receivable account on December 31, and how much gain or loss was recorded as a result of the adjustment? Per Unit of Foreign Currency $0.83 Date December 31 0.81 March 1 0.84 Minimized View A. Receivable Balance, $170,000; Gain/Loss Recorded, $4,000 gain B. Receivable Balance. $162.000; Gain/Loss Recorded. $4,000 loss 12:27-35 PM MST here to search

Explanation / Answer

Rate of foreign currency at date of sale i.e.1st november = $0.83

Accounts receivable to be recorded at date of transaction at = 2,00,000*$0.83 = $1,66,000

At December 31, rate of foreign currency decreased to $0.81

Therefore loss to be recorded = ($0.83 - $0.81)*$2,00,000 = $4,000 loss

Receivable balance on Dec'31 = $1,66,000 - $4,000 = $1,62,000

Therefore 2nd option is the right choice.

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