A December 15, 2008, purchase of goods was denominated in a currency other than the entity's functional currency. The transaction resulted in a payable that was fixed in terms of the amount of foreign currency and was paid on the settlement date, January 20, 2009. The exchange rate of the currency in which the transaction was denominated changed at December 31, 2008, resulting in a loss that should:

A. Not be reported until January 20, 2009, the settlement date.

B. Be included as a component of comprehensive income for 2008.

C. Be included as a deferred charge at December 31, 2008.

D. Be included as a component of income from continuing operations for 2008.

Question

Allie Atkins

Business

21 April, 10:13

A December 15, 2008, purchase of goods was denominated in a currency other than the entity's functional currency. The transaction resulted in a payable that was fixed in terms of the amount of foreign currency and was paid on the settlement date, January 20, 2009. The exchange rate of the currency in which the transaction was denominated changed at December 31, 2008, resulting in a loss that should:

A. Not be reported until January 20, 2009, the settlement date.

B. Be included as a component of comprehensive income for 2008.

C. Be included as a deferred charge at December 31, 2008.

D. Be included as a component of income from continuing operations for 2008.

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Answers (1)

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Marcelo Booth · Answer 1

D. Be included as a component of income from continuing operations for 2008.

Explanation:

The exchange rate change in 2008 caused foreign currency exchange to loss. This loss should be recognized in 2008 as a component of income from continuing operations in the income statement. Also, losses and gains that was caused by the changes in exchange rates are identify in current earnings in the period in which the exchange rate changes caused the loss.