On December 1, 2020, Venice Company (a U.S.-based company) entered into a three-month forward contract to purchase 1,000,000 pesos on March 1, 2021. The following U.S. dollar per peso exchange rates apply:

Ignoring present values, which of the following correctly describes the manner in which Venice Company will report the forward contract on its December 31, 2020, balance sheet?

a. As an asset in the amount of $1,000

b. As an asset in the amount of $4,000

c. As a liability in the amount of $1,000

d. As a liability in the amount of $4,000

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Forward Rate Date Spot Rate (to March 1, 2021) December 1, 2020 $0.088 $0.094 December 31, 2020 0.095 0.098 March 1, 2021 0.105 N/A