Question
Amazing Corporation, a U.S. enterprise, sold product to a customer in Wales on October 1, 2021 for 100,000 with payment required on April 1, 2022.
Amazing Corporation, a U.S. enterprise, sold product to a customer in Wales on October 1, 2021 for 100,000 with payment required on April 1, 2022. Relevant exchange rates are: Spot rate Forward rate (to 4/1/22) October 1, 2021 $1.87 $1.85 December 31, 2021 1.85 $1.84 April 1, 2022 1.90 The discount factor corresponding to the company's incremental borrowing rate for 6 months is 0.95. Assume that Amazing Corporation enters a forward contract on October 1, 2021 to sell 100,000 six months hence, on April 1, 2022, and designates the forward contract as a cash flow hedge of the foreign currency receivable, with hedge effectiveness based on changes in forward rates. What net gain or loss should Amazing Corporation report for the foreign currency receivable and the forward contract on its December 31, 2021 financial statements?
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