Spot Rate $0.044 0.046 Forward Rate (to March 1, 2018) $0.047 0.049 Date 1, 2017 December 31, 2017 March 1, 2018 0.050 N/A
On December 1, 2017, Ringling Company (a U.S.-based company) entered into a three-month forward contract to purchase 1,000,000 pesos on March 1, 2018. The following U.S. dollar per peso exchange rates apply:
Ringling’s incremental borrowing rate is 12 percent. The present value factor for two months at an annual interest rate of 12 percent (1 percent per month) is 0.9803.
Which of the following correctly describes the manner in which Ringling Company will report the forward contract on its December 31, 2017,
a. As an asset in the amount of $1,960.60.
b. As an asset in the amount of $2,940.90.
c. As a liability in the amount of $980.30.
d. As a liability in the amount of $2,940.90.
![Spot Rate
$0.044
0.046
Forward Rate
(to March 1, 2018)
$0.047
0.049
Date
1, 2017
December 31, 2017
March 1, 2018
0.050
N/A](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ff33cdc86-d2b8-4d2d-a886-3b8b2279d98b%2Fbd23d75a-6707-42c4-868e-02a1814e7fbe%2Fp0a90j.png&w=3840&q=75)
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