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Which of the following combinations correctly describes the relationship between foreign currency transactions, exchange rate changes, and foreign exchange gains and losses? Type of Transaction Foreign Currency Foreign Exchange Gain or Loss a. Export sale Appreciates Loss b. Import purchase Appreciates Gain c. Import purchase Depreciates Gain d. Export sale Depreciates Gain

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Answer:

C) Import purchase - Depreciates - Gain

Explanation:

When a country A imports products from country B, it crates a foreign currency payable account. If country B's currency depreciates, then the amount of the foreign currency payable account decreases, resulting in a gain from foreign exchange operations.

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