On December 12, 20X5, Dahl Company entered into three forward exchange contracts, each to purchase 100,000 francs in 90 days. The relevant exchange rates are as follows: Spot Rate Forward Rate for March 12, 20X6 December 12, 20X5 $ 0.88 $ 0.90 December 31, 20X5 0.98 0.93 3. Dahl entered into the first forward contract to manage the foreign currency risk from a purchase of inventory in November 20X5, payable in March 20X6. The forward contract is not designated as a hedge. At December 31, 20X5, what amount of foreign currency transaction gain should Dahl include in income from this forward contract?
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Select the correct answer for each of the following questions.
Note: Items 3 through 5 are based on the following:
On December 12, 20X5, Dahl Company entered into three forward exchange contracts, each to purchase 100,000 francs in 90 days. The relevant exchange rates are as follows:
| Spot Rate | Forward Rate for March 12, 20X6 | |
|---|---|---|
| December 12, 20X5 | $ 0.88 | $ 0.90 |
| December 31, 20X5 | 0.98 | 0.93 |
3. Dahl entered into the first forward contract to manage the foreign currency risk from a purchase of inventory in November 20X5, payable in March 20X6. The forward contract is not designated as a hedge. At December 31, 20X5, what amount of foreign currency transaction gain should Dahl include in income from this forward contract?
multiple choice-
$10,000
-
$0
-
$5,000
-
$3,000
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