Imp entered into the second forward contract to hedge a commitment to purchase equipment being manufactured to Imp specifications. At December 31, 2022, what amount of foreign currency transaction gain should Imp include in income from this forward contract? a. $0 b. $3,000 c. $5,000 d. $10,000
Imp entered into the second forward contract to hedge a commitment to purchase equipment being manufactured to Imp specifications. At December 31, 2022, what amount of foreign currency transaction gain should Imp include in income from this forward contract? a. $0 b. $3,000 c. $5,000 d. $10,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
On December 12, year 11, Imp Co. entered into three forward exchange contracts, each to purchase 100,000 LCU's in 90 days. The relevant exchange rates are as follows:
Spot rate Forward rate
(for March 12, year 12)
December 12, year 11 $0.88 $0.90
December 31, year 11 $0.98 $0.93
Imp entered into the second forward contract to hedge a commitment to purchase equipment being manufactured to Imp specifications. At December 31, 2022, what amount of foreign currency transaction gain should Imp include in income from this forward contract?
a. $0
b. $3,000
c. $5,000
d. $10,000
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