Question: On September 1, 2010, Cano & Co., a US corporation, sold merchandise to a foreign firm for 250,000 Botswana pula. Terms of the sale require

On September 1, 2010, Cano & Co., a US corporation, sold merchandise to a foreign firm for 250,000 Botswana pula. Terms of the sale require payment in pula on February 1, 2011. On September 1, 2010, the spot exchange rate was $.20 per pula. At December 31, 2010, Cano’s year-end, the spot rate was $.19, but the rate increased to $.22 by February 1, 2011, when payment was received. How much should Cano report as foreign exchange transaction gain or loss as part of 2011 income?

a. $0.

b. $2,500 loss.

c. $5,000 gain.

d. $7,500 gain.

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