[The following information applies to the questions displayed below.]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 RateForward Rate for March 12, 20X6December 12, 20X5$ 0.88$ 0.90December 31, 20X50.980.93 2. On September 1, 20X5, Johnson Incorporated entered into a foreign exchange contract for speculative purposes by purchasing €50,000 for delivery in 60 days. The rates to exchange U.S. dollars for euros follow: 9/1/X59/30/X5Spot rates$ 0.75$ 0.7030-day forward rate0.730.7260-day forward rate0.740.73In its September 30, 20X5, income statement, what amount should Johnson report as foreign exchange loss?multiple choice$2,500$500$1,500$1,000

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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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[The following information applies to the questions displayed below.]

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

2. On September 1, 20X5, Johnson Incorporated entered into a foreign exchange contract for speculative purposes by purchasing €50,000 for delivery in 60 days. The rates to exchange U.S. dollars for euros follow:

	9/1/X5	9/30/X5
Spot rates	$ 0.75	$ 0.70
30-day forward rate	0.73	0.72
60-day forward rate	0.74	0.73

In its September 30, 20X5, income statement, what amount should Johnson report as foreign exchange loss?

multiple choice

$2,500
$500
$1,500
$1,000

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