On October 1, 2001, Mud Co. a U.S. company, purchased parts from Terra, a Portuguese company, with payment due on December 1, 2001. If Mud’s 2001 operating income include no foreign exchange gain or loss, the transaction could have

A Resulted in an extraordinary gain
B Been denominated in the U.S. currency
C Caused a foreign exchange gain to be reported as a deferred charge on the balance sheet
D Caused a foreign exchange gain to be reported as a separate component of stockholders’ equity
E Caused a foreign exchange gain to be reported as an accrual on the balance sheet

I choose (b) if there is no foreign exchange gain or loss then the functional currency stayed in the U.S. and therefore the currency was denominated in the US. Is there someone out there that can confirm that I am right or not in giving this as my answer. And if not what is the correct answer. Thanks!

I choose (b) if there is no foreign exchange gain or loss then the functional currency stayed in the U.S. and therefore the currency was denominated in the US. Is there someone out there that can confirm that I am right or not in giving this as my answer. And if not what is the correct answer. Thanks!

Wow! I cannot believe my eyes that no one is out there that does not have his/her own thoughts regarding this question. I figure that there would be more than zero out there that would be respond with confirmation of either that I was correct or I was totally off the track with my answer. I really am interested in knowing if someone else has come up with the same asnswer as I did or with a different one. Thanks!

Jeeze dude, give the people TIME to answer. The people who are here are here on a voluntary basis and may not be online at this moment, considering it is a weekend they may be doing things with friends and family.

Chill out. While we do not do homework for our posters it is clear that you did do yours and you showed effort. Someone will help you when they get online.