On July 1, 2011, Houghton Company borrowed 200,000 euros from a foreign lender evidenced by an interest-bearing note due on July 1, 2012. The note is denominated in euros. The U.S. dollar equivalent of the note principal is as follows:
Date | Amount |
July 1, 2011 (date borrowed) | $195,000 |
December 31, 2011 (Houghton's year-end) | 220,000 |
July 1, 2012 (date repaid) | 230,000 |
In its 2012 income statement, what amount should Houghton include as a foreign exchange gain or loss on the note?
a. $35,000 gain.
b. $35,000 loss.
c. $10,000 gain.
d. $10,000 loss.
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