Use the following forward and spot prices for Canadian dollars (CS) to answer the question below. The prices are in U.S. dollars ($/CS). Forward rate for 4/15/20 Spot rate delivery of Canadian dollars $0.695 0.750 November 15, 2019 December 31, 2019 March 1, 2020 April 15, 2020 $0.705 0.765 0.720 0.740 $695,000 $705,000 $750,000x $765,000 0.715 0.740 On November 15, 2019, a U.S. company takes delivery of merchandise costing C$1,000,000 from a Canadian supplier and records an account payable. On the same date, the company enters a forward contract locking in the U.S. dollar purchase price of C$1,000,000, for delivery on April 15, 2020. The forward contract is closed and payment is made to the supplier on April 15, 2020. The company's accounting year ends on December 31. Assuming the company still holds the merchandise at December 31, 2019, at what amount is the merchandise reported?
Use the following forward and spot prices for Canadian dollars (CS) to answer the question below. The prices are in U.S. dollars ($/CS). Forward rate for 4/15/20 Spot rate delivery of Canadian dollars $0.695 0.750 November 15, 2019 December 31, 2019 March 1, 2020 April 15, 2020 $0.705 0.765 0.720 0.740 $695,000 $705,000 $750,000x $765,000 0.715 0.740 On November 15, 2019, a U.S. company takes delivery of merchandise costing C$1,000,000 from a Canadian supplier and records an account payable. On the same date, the company enters a forward contract locking in the U.S. dollar purchase price of C$1,000,000, for delivery on April 15, 2020. The forward contract is closed and payment is made to the supplier on April 15, 2020. The company's accounting year ends on December 31. Assuming the company still holds the merchandise at December 31, 2019, at what amount is the merchandise reported?
Chapter20: Short-term Financing
Section: Chapter Questions
Problem 4ST
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Question
Transcribed Image Text:Use the following forward and spot prices for Canadian dollars (CS) to answer the question below. The prices are in U.S. dollars ($/C$).
Forward rate for 4/15/20
Spot rate delivery of Canadian dollars
$0.695
0.750
0.715
0.740
November 15, 2019
December 31, 2019
March 1, 2020
April 15, 2020
$695,000
Ⓒ$705,000
On November 15, 2019, a U.S. company takes delivery of merchandise costing C$1,000,000 from a Canadian supplier and records an account payable. On the same date, the company enters a forward contract locking in
the U.S. dollar purchase price of C$1,000,000, for delivery on April 15, 2020. The forward contract is closed and payment is made to the supplier on April 15, 2020. The company's accounting year ends on December 31.
Assuming the company still holds the merchandise at December 31, 2019, at what amount is the merchandise reported?
$750,000x
$0.705
0.765
Ⓒ$765,000
0.720
0.740
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