On November 1, 20x2, Irvin Corp. sold goods to John Company for 130,000 rupee. Payment is due on March 30, 20x3. Also on November 1, 20x2,Irvin Corp. entered into a forward contract to sell 130,000 rupees on March 1, 20x3. The following are the exchange rates:Dec. 31,Nov. 1, 20x2Mar. 30, 20x320x2Spot rates0.820.800.87Forward rate 0.850.860.88Irvin's incremental borrowing rate is 8%.What is the net impact on Irvin's income in 20x3 as a result of this hedge?O 2,583 net gainO 7,800 net gainO 2,600 net gainO 7,783 net gain

Here, Forward Rate of November contract is 0.85 Spot Rate at Match is 0.87 Amount is 130,000

Answered: On November 1, 20x2, Irvin Corp. sold…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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On December 1, Year 1, Triaxal Incorporation enters into a forward contract to sell one million Philippines pesos (PP) to its bank in exchange for Canadian dollars on March 1, Year 2, at the market rate for a 90-day forward contract of PP1=$0.0227. On December 31, Year 1, Triaxal’s year-end, the 60-day forward rate to sell Philippines pesos on March 1 is quoted at PP1=$0.0222. On March 1, Year 2, the currencies are exchanged when the spot rate is PP1=$0.0220. Required Prepare journal entries for speculative forward contract under Gross Method and Net Method.
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