Question 15Levin company entered into a forward contract to speculate in the foreign currency. It sold 100,000 foreign currency units under a contract dated November 1, 20X8, for delivery on January 31, 20X9: 11/1/20X812/31/20X8Spot rates$0.035$0.03730-day forward rate 0.034 0.03690-day forward rate 0.033 0.035 In its income statement for the year ended December 31, 20X8, what amount of loss should Levin report from this forward contract? $0 $300 $200 $100

SOLUTION- EXPLANATION- CALCULATE THE LOSS SHOULD ON THE THIS FORWARD CONTRACT- SALE VALUE IF FORWARD CONTRACT EXISTS ON NOV 1 (100000*0.033) 3300 SALE VALUE IF FORWARD CONTRACT EXISTS ON DEC 31 (100000*0.036) (3600) LOSS ON FORWARD CONTRACT (300)SO THE CORRECT OPTION IS B- $300 .

Answered: Levin company entered into a forward…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question 15

Levin company entered into a forward contract to speculate in the foreign currency. It sold 100,000 foreign currency units under a contract dated November 1, 20X8, for delivery on January 31, 20X9:

	11/1/20X8	12/31/20X8
Spot rates	$	0.035	$	0.037
30-day forward rate		0.034		0.036
90-day forward rate		0.033		0.035

In its income statement for the year ended December 31, 20X8, what amount of loss should Levin report from this forward contract?

		$0
		$300
		$200
		$100

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