Question
2. Amazing Corporation, a U.S. enterprise, sold product to a customer in Wales on October 1, 20x1 for 100,000 with payment required on April 1,
2. Amazing Corporation, a U.S. enterprise, sold product to a customer in Wales on October 1, 20x1 for 100,000 with payment required on April 1, 20x2. Relevant exchange rates are:
| Spot rate | Forward rate (to 4/1/x2) |
October 1, 20x1 | $1.87 | $1.85 |
December 31, 20x1 | 1.85 | $1.84 |
April 1, 20x2 | 1.90 |
|
|
The discount factor corresponding to the company's incremental borrowing rate for 6 months is 0.95. Assuming that Amazing Corporation does not hedge this transaction, what is the amount of exchange gain or loss that it should show on its December 31, 2001 income statement?
A) Loss $1,000
B) Loss $2,000
C) Gain $1,000
D) Gain $1,900
(course : International accounting )
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