Choice "B" is correct. On September 22, the liability denominated in dollars equals $5,500 (10,000 units x $.55 spot rate). On December 31, the liability denominated in dollars equals $7,000 (10,000 units x $.70 spot rate). At year end, the foreign currency transaction loss equals $1,500 ($7,000 - $5,500).
Choice "a" is incorrect. Since the spot rate at year end is different from the spot rate at September 22, a foreign currency transaction gain or loss must be recognized.
Choice "c" is incorrect. Only the loss as of December 31 should be recognized.
Choice "d" is incorrect. Only the loss as of December 31 should be recognized.