A US-Based Company Purchases Merchandise on Account from a Company in in Mexico

Multiple Choice

A U.S.-based company purchases merchandise on account from a company in Mexico. The purchase contract is denominated in pesos. If the peso decreases in value relative to the dollar, the purchaser will record a ________. The peso ________ relative to the dollar.

A) Foreign Currency Transaction Loss; weakens
B) Foreign Currency Transaction Loss; strengthens
C) Foreign Currency Transaction Gain; weakens
D) Foreign Currency Transaction Gain; strengthens