Chapter 11, Problem 11.14.6E

Foreign Currency Transactions [AICPA Adapted]
Choose the correct answer for each of the following questions.

6. On October 2, 20X5, Louis Co., a U.S. company, purchased machinery from Stroup, a German company, with payment due on April 1, 20X6. If Louis’s 20X5 operating income included no foreign exchange gain or loss, the transaction could have
a. Resulted in a loss to be included in other comprehensive income.
b. Been denominated in U.S. dollars.
c. Caused a foreign currency gain to be reported as a contra account against machinery
d. Cased a foreign currency translation gain to be reported as a separate component of stockholders’ equity.