E 13-5

[Based on AICPA] Various foreign currency hedge situations On December 12, 2016, Car entered into three forward exchange contracts, each to purchase 100,000 Canadian dollars in 90 days. Assume a 12 percent interest rate. The relevant exchange rates are as follows:

Spot Rate Forward Rate (for March 11, 2017)

December 12, 2016 $0.91 $0.90 December 31, 2016 $0.98 $0.99 REQuIRED 1. Car entered into the first forward contract to hedge a purchase of inventory in November 2016, payable in March 2017. At December 31, 2016, what amount of foreign currency transaction gain should Car include in income from this forward contract? Explain.