Question

Meilly Company, a Canadian company, sold merchandise inventory on account to a company in Long Beach, California, for US$800,000 on March 1, 2019, with payment due on April 1, 2019. The following exchange rates existed on the dates significant for accounting purposes:

March 1, 2019, spot rate: US$1.00 = CAD 1.30
April 1, 2019, spot rate: US$1.00 = CAD 1.35
If Meilly Company receives payment on April 1, 2019, how much Canadian dollars (CAD) will Meilly Company receive after converting the US$800,000 at the spot rate on April 1, 2019?
a. CAD 1,080,000
b. CAD 945,000
c. CAD 592,592
d. CAD 592,593
Please select the correct option.

Answer 1

Meilly Company will receive CAD 1,080,000 after converting US$800,000 at the spot rate on April 1, 2019.

Step-by-step explanation:

To calculate how much Canadian dollars Meilly Company will receive after converting US$800,000 at the spot rate on April 1, 2019, we need to multiply the US dollar amount by the spot rate on that date. The spot rate on April 1, 2019, was US$1.00 = CAD 1.35. Therefore, the amount in Canadian dollars that Meilly Company will receive is:

US$800,000 * CAD 1.35 = CAD 1,080,000

So, the correct option is a. CAD 1,080,000.