Forward exchange contract designated as a fair value hedge of a foreign-currency-denominated firm commitment to sell inventory, weakening $US Our U.S.-based company enters into a “firm commitment” with Malta-based retailer on November 10, 2018. The firm commitment requires our company to sell 70,000 units of an inventory item costing €9.00 each to the Maltese company. Our company is contractually committed to ship the inventory (i.e., title transfers) on February 10, 2019, with payment in Euros on the same date. Our company does recurring business with the Maltese company, and the firm commitment includes significant monetary penalties for nonperformance. Also assume, on November 10, 2018, our company enters into a contract with a foreign currency exchange broker to sell Euros (for settlement on February 10, 2019) to mitigate the risk of exchange rate fluctuation. Our company’s functional currency is the U.S. dollar and our forward exchange contract qualifies as a fair value hedge. The relevant exchange rates and related balances for the period from November 10, 2018, to February 10, 2019, are as follows: Derivative—Forward Date Spot Rate ($US = €1) Sale Transaction Forward Ratea ($US = €1) FV Asset (Liability)b Change in FV November 10, 2018 1.18 1.20 December 31, 2018 1.22 1.25 $(31,500) $(31,500) February 10, 2019 1.27 $800,100 1.27 (44,100) (12,600) a For settlement on February 10, 2019 b Ignore discounting in the computation of fair values. NEED HELP WITH What is the total amount of sales recognized across the quarters ending December 31, 2018, and March 31, 2019?
Forward exchange contract designated as a fair value hedge of a foreign-currency-denominated firm commitment to sell inventory, weakening $US Our U.S.-based company enters into a “firm commitment” with Malta-based retailer on November 10, 2018. The firm commitment requires our company to sell 70,000 units of an inventory item costing €9.00 each to the Maltese company. Our company is contractually committed to ship the inventory (i.e., title transfers) on February 10, 2019, with payment in Euros on the same date. Our company does recurring business with the Maltese company, and the firm commitment includes significant monetary penalties for nonperformance. Also assume, on November 10, 2018, our company enters into a contract with a foreign currency exchange broker to sell Euros (for settlement on February 10, 2019) to mitigate the risk of exchange rate fluctuation. Our company’s functional currency is the U.S. dollar and our forward exchange contract qualifies as a fair value hedge. The relevant exchange rates and related balances for the period from November 10, 2018, to February 10, 2019, are as follows:
| Derivative—Forward | |||||
|---|---|---|---|---|---|
|
Date |
Spot Rate ($US = €1) |
Sale Transaction |
Forward Ratea ($US = €1) |
FV Asset (Liability)b |
Change in FV |
| November 10, 2018 | 1.18 | 1.20 | |||
| December 31, 2018 | 1.22 | 1.25 | $(31,500) | $(31,500) | |
| February 10, 2019 | 1.27 | $800,100 | 1.27 | (44,100) | (12,600) |
a For settlement on February 10, 2019
b Ignore discounting in the computation of fair values.
NEED HELP WITH
What is the total amount of sales recognized across the quarters ending December 31, 2018, and March 31, 2019?
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