Question
On November 12, Higgins, Inc., a U.S. Company, sold merchandise on credit to Kagome of Japan at a price of 1,630,000 yen. The exchange rate
On November 12, Higgins, Inc., a U.S. Company, sold merchandise on credit to Kagome of Japan at a price of 1,630,000 yen. The exchange rate was $.00850 per yen on the date of sale. On December 31, when Higgins prepared its financial statements, the exchange rate was $.00856. Kagome paid in full on January 12, when the exchange rate was $.00874. On December 31, Higgins should prepare the following journal entry:
Multiple Choice
a. Debit Sales $98; credit Foreign Exchange Gain $98.
b. Debit Foreign Exchange Loss $98; credit Sales $98.
c. Debit Accounts Receivable-Kagome $98; credit Foreign Exchange Gain $98.
d. Debit Foreign Exchange Loss $98; Accounts Receivable-Kagome $98.
e. No journal entry is required until the amount is collected.
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