You are reviewing your client's Multicurrency company Balance Sheet, and the balance as of the previous fiscal year-end for thei

Question

9 days ago

5

You are reviewing your client's Multicurrency company Balance Sheet, and the balance as of the previous fiscal year-end for thei

r Canadian bank account, which they closed last year, is a $10 debit balance in US dollars (the home currency). However, the Canadian dollar balance correctly indicates the account has been closed. Why would this be the case?
1. You have to create a journal entry debiting foreign exchange gain or loss $10 and crediting the Canadian bank account $10.
2. The Canadian bank account has not been reconciled as of the last fiscal year.
3. The Balance Sheet shows the cumulative balance of the account in the home currency based on the home currency value of each of the transactions using the exchange rate that appears on each screen.
4. You have to perform a home currency adjustment for the Canadian bank account as of the current date
5. You have to perform a home currency adjustment for the Canadian bank account as of the last fiscal year.

Business

1 answer:

soldi70 [3.4K] · Answer 1 · 2026-03-30T02:04:11+03:00

1. A journal entry must be created that debits a foreign exchange gain or loss of $10 while crediting the Canadian bank account for the same amount. 4. As of today's date, a home currency adjustment must be made for the Canadian bank account. Explanation: This discrepancy stems from a foreign exchange loss. Companies operating internationally often experience gains or losses due to currency fluctuations. For instance, when preparing financial documents, you might convert Canadian dollars into your local currency, which is US dollars in this case. Subsequently, if the exchange rate shifts, and the value of the Canadian dollar rises post-conversion, an adjustment is required to reflect that gain. Conversely, if the Canadian dollar's value drops after conversion, as occurred here, then a loss has to be recorded, necessitating an adjusting entry. To rectify this, you should: Dr Foreign exchange gain/loss 10 Cr Canadian bank account 10.