The following information applies to Denton Incorporated’s sale of 10,000 foreign currency units under a forward contract dated November 1, 20X5, for delivery on January 31, 20X6: 11/1/X5 12/31/X5 Spot rates $ 0.80 $ 0.83 30-day forward rate 0.79 0.82 90-day forward rate 0.78 0.81 1. Denton entered into the forward contract to speculate in the foreign currency. In its income statement for the year ended December 31, 20X5, what amount of loss should Denton report from this forward contract? multiple choice $400 $300 $200 $0
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 |
1. The following information applies to Denton Incorporated’s sale of 10,000 foreign currency units under a forward contract dated November 1, 20X5, for delivery on January 31, 20X6:
| 11/1/X5 | 12/31/X5 | |
|---|---|---|
| Spot rates | $ 0.80 | $ 0.83 |
| 30-day forward rate | 0.79 | 0.82 |
| 90-day forward rate | 0.78 | 0.81 |
1. Denton entered into the forward contract to speculate in the foreign currency. In its income statement for the year ended December 31, 20X5, what amount of loss should Denton report from this forward contract?
multiple choice-
$400
-
$300
-
$200
-
$0
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-
$500
-
$1,500
-
$1,000
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
-
-
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