On November 12, Higgins, Inc., a U.S. Company, sold merchandise on credit to Kagome of Japan at a price of 1,660,000 yen. The exchange rate was $0.00853 per yen on the date of sale. On December 31, when Higgins prepared its financial statements, the exchange rate was $0.00859. Kagome paid in full on January 12, when the exchange rate was $0.00877. On December 31, Higgins should prepare the following journal entry:
A. Debit Accounts Receivable-Kagome $99.6; credit Foreign Exchange Gain $99.6.
B. Debit Foreign Exchange Loss $99.6; Accounts Receivable-Kagome $99.6.
C. Debit Sales $99.6; credit Foreign Exchange Gain $99.6.
D. Debit Foreign Exchange Loss $99.6; credit Sales $99.6.
E. No journal entry is required until the amount is collected.
Answer: A
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