A U.S. company anticipates that it will sell merchandise for €100,000 at the end of August and receive payment for it at the end of October. On May 1, when the spot rate is $1.20 and the forward rate for delivery on October 31 is $1.21, the company enters a forward contract to sell €100,000 on October 31. The forward contract qualifies as a cash flow hedge of the forecasted sale. The company sells the merchandise on August 30, when the spot rate is $1.232 and the forward rate for October 31 delivery is $1.23 and receives payment of €100,000 and closes the forward contract on October 31, when the spot rate is $1.24. The company has a December 31 year-end. Sales revenue is reported on the company's income statement in the amount of:

FINANCIAL ACCOUNTING
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Chapter1: Financial Statements And Business Decisions
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A U.S. company anticipates that it will sell merchandise for €100,000 at the end of August and receive payment for it at the end of October. On May
1, when the spot rate is $1.20 and the forward rate for delivery on October 31 is $1.21, the company enters a forward contract to sell €100,000 on
October 31. The forward contract qualifies as a cash flow hedge of the forecasted sale. The company sells the merchandise on August 30, when the
spot rate is $1.232 and the forward rate for October 31 delivery is $1.23 and receives payment of €100,000 and closes the forward contract on
October 31, when the spot rate is $1.24. The company has a December 31 year-end.
Sales revenue is reported on the company's income statement in the amount of:
Sales revenue is reported on the company's income statement in the amount of:
Select one:
O A. $125,200
O B. $121,200
O C. $123,000
D. $123,200
A U.S. company anticipates that it will purchase merchandise for €100,000 at the end of August and pay for it at the time the merchandise is
delivered. On May 1, when the spot rate is $1.20 and the forward rate for delivery on August 30 is $1.21, the company enters a forward contract to
buy €100,000 on August 30. The forward contract qualifies as a cash flow hedge of the forecasted purchase. The company purchases the
merchandise on August 30, when the spot rate is $1.232, and closes the forward contract and pays the supplier €100,000. The company sells the
merchandise in October. The company has a December 31 year-end.
On August 30, the company records the merchandise at what amount?
Select one:
A. $123,200
B. $125,400
C. $120,000
D. $121,000
Transcribed Image Text:A U.S. company anticipates that it will sell merchandise for €100,000 at the end of August and receive payment for it at the end of October. On May 1, when the spot rate is $1.20 and the forward rate for delivery on October 31 is $1.21, the company enters a forward contract to sell €100,000 on October 31. The forward contract qualifies as a cash flow hedge of the forecasted sale. The company sells the merchandise on August 30, when the spot rate is $1.232 and the forward rate for October 31 delivery is $1.23 and receives payment of €100,000 and closes the forward contract on October 31, when the spot rate is $1.24. The company has a December 31 year-end. Sales revenue is reported on the company's income statement in the amount of: Sales revenue is reported on the company's income statement in the amount of: Select one: O A. $125,200 O B. $121,200 O C. $123,000 D. $123,200 A U.S. company anticipates that it will purchase merchandise for €100,000 at the end of August and pay for it at the time the merchandise is delivered. On May 1, when the spot rate is $1.20 and the forward rate for delivery on August 30 is $1.21, the company enters a forward contract to buy €100,000 on August 30. The forward contract qualifies as a cash flow hedge of the forecasted purchase. The company purchases the merchandise on August 30, when the spot rate is $1.232, and closes the forward contract and pays the supplier €100,000. The company sells the merchandise in October. The company has a December 31 year-end. On August 30, the company records the merchandise at what amount? Select one: A. $123,200 B. $125,400 C. $120,000 D. $121,000
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