Question

Tuliptime, Inc. sold American fashions to a Japanese company at a price of 3.3 million yen. On the sale date, the exchange rate was $0.01 per Japanese yen, but when Tuliptime received payment from its customer, the exchange rate was $0.0103 per yen. When the foreign receivable was collected, Tuliptime:_______A. Credited Sales for $1,170.

B. Credited Gain on Fluctuation of Foreign Currency for $1,170.
C. Debited Loss on Fluctuation of Foreign Currency for $1,170.
D. Debited Cash for $39,000.

Answer 1

B. Credited Gain on fluctuation of foreign currency for $1,170

Step-by-step explanation:

The journal entry to record the collection of foreign receivables is provided

Account Titles and Explanation Debit Credit

Cash 40,170

(3,900,000 * 0.0103)

Foreign reserve 39,000

(3,900,000 * 0.01)

Gain of fluctuation of foreign currency 1,170

(3,900,000 * 0.0003)

Hence, the correct option is Credited Gain on fluctuation of foreign currency for $1,170