Kreighton Manufacturing purchased on credit £46,000 worth of production materials from a British company when the exchange rate was $1.93 per British pound. At the year-end balance sheet date the exchange rate increased to $2.72. If the liability is still unpaid at that time, Kreighton must record a:
A. gain of $125,120.
B. gain of $36,340.
C. loss of $36,340.
D. loss of $125,120.
E. neither a gain nor loss.
Answer: C
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