Monument Company (a U.S.-based company) ordered a machine costing €200,000 from a foreign supplier on January 15, when the spot rate was $1.11 per €. A one-month forward contract was signed on that date to purchase €200,000 at a forward rate of $1.13. The forward contract is properly designated as a fair value hedge of the €200,000 firm commitment. On February 15, when the company receives the machine, the spot rate is $1.12. At what amount should Monument Company capitalize the machine on its books? $222,000 $226,000 $224,000 $23,000
Monument Company (a U.S.-based company) ordered a machine costing €200,000 from a foreign supplier on January 15, when the spot rate was $1.11 per €. A one-month forward contract was signed on that date to purchase €200,000 at a forward rate of $1.13. The forward contract is properly designated as a fair value hedge of the €200,000 firm commitment. On February 15, when the company receives the machine, the spot rate is $1.12. At what amount should Monument Company capitalize the machine on its books? $222,000 $226,000 $224,000 $23,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Monument Company (a U.S.-based company) ordered a machine costing €200,000 from a foreign supplier on January 15, when the spot rate was $1.11 per €. A one-month forward contract was signed on that date to purchase €200,000 at a forward rate of $1.13. The forward contract is properly designated as a fair value hedge of the €200,000 firm commitment. On February 15, when the company receives the machine, the spot rate is $1.12. At what amount should Monument Company capitalize the machine on its books?
-
$222,000
-
$226,000
-
$224,000
-
$23,000
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