On November 30, 2019, a U.S. company, with a December 31 year-end, enters a forward purchase contract for €100,000 to be delivered on March 20, 2020, when the forward rate for March 20 delivery is $1.23/€. The forward contract does not qualify as a hedge. At year-end, the forward rate for delivery on March 30 is $1.21/€. The company closes the contract at its expiration date, when the spot rate is $1.24/€. At what amount are gains and losses reported in income on the forward in 2019 and 2020? 2019 A. B. C. D. $0 $2.000 gain $2,000 loss $0 2020 $1,000 loss $3,000 loss $3,000 gain $1,000 gain
On November 30, 2019, a U.S. company, with a December 31 year-end, enters a forward purchase contract for €100,000 to be delivered on March 20, 2020, when the forward rate for March 20 delivery is $1.23/€. The forward contract does not qualify as a hedge. At year-end, the forward rate for delivery on March 30 is $1.21/€. The company closes the contract at its expiration date, when the spot rate is $1.24/€. At what amount are gains and losses reported in income on the forward in 2019 and 2020? 2019 A. B. C. D. $0 $2.000 gain $2,000 loss $0 2020 $1,000 loss $3,000 loss $3,000 gain $1,000 gain
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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