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Hi
I have a question about how fx gain is recognized in the SPLQ: (ii) Vernon Co also sold goods to an overseas customer on 1 December 20X8 for 12m Kromits (Kr). They agreed a 60-day payment term. No entries have yet been made to record this sale, although the goods were correctly removed from inventory and expensed in cost of sales. The amount remains unpaid at 31 December 20X8.
Relevant exchange rates are:
1 December 20X8: 6·4 Kr/$
31 December 20X8: 6·0 Kr/$I know the $125 should go to profit & loss and it is not Revenue but I don’t understand why it reduces the operating expense account. I plugged $125 in the investment income account but it was wrong. Please help me with this.
Thanks,
It’s not investment income, it’s an operating activity so must go above the operating profit line. In the real world you’d code it to the right account for the specific transaction eg FX gains/losses. But here it’s high level so it’s an adjustment to Op Ex. It’s the only place it can go.
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