Question

on november 1, year 3, muller corporation sold merchandise to wainwright corporation, a swiss firm. muller measured and recorded the account receivable from the sale at $78,000. wainwright paid for this account on november 30, year 3. spot rates for swiss francs on november 1 and november 30, respectively, were $0.80 and $0.78. if the sale of the merchandise was denominated in francs, the november 30 entry to record the receipt of payment from wainwright included a multiple choice credit to accounts receivable for $76,050. credit to exchange gain for $1,950. debit to cash for $78,000. debit to exchange loss for $1,950.'

Answer 1

Muller Corporation dealt with a foreign currency transaction involving the sale and payment for merchandise, leading to an accounting entry that considers exchange rates on different dates.

Step-by-step explanation:

The student's question relates to the accounting treatment of a foreign currency transaction in the context of merchandise sales. On November 1, year 3, Muller Corporation recorded an account receivable of $78,000 from a sale denominated in Swiss francs. The spot rates for Swiss francs were $0.80 on November 1 and $0.78 on November 30, the day Wainwright Corporation paid for the merchandise. Therefore, to calculate the value of the payment in US dollars on November 30, we use the spot rate of $0.78. Since the original receivable was recorded at $78,000, we apply the exchange rate to find the equivalent amount in Swiss francs and then reconvert it at the spot rate on November 30.