Question
Icebreaker Company (a U.S.-based company) purchases materials from a foreign supplier on December 1, 2020, with payment of 29,000 dinars to be made on March
Icebreaker Company (a U.S.-based company) purchases materials from a foreign supplier on December 1, 2020, with payment of 29,000 dinars to be made on March 1, 2021. The materials are consumed immediately and recognized as cost of goods sold at the date of purchase. On December 1, 2020, Icebreaker enters into a forward contract to purchase 29,000 dinars on March 1, 2021.
Relevant exchange rates for the dinar on various dates are as follows:
| Date | Spot Rate | Forward Rate (to March 1, 2021) | ||||
| December 1, 2020 | $ | 4.70 | $ | 4.775 | ||
| December 31, 2020 | 4.80 | 4.900 | ||||
| March 1, 2021 | 4.95 | N/A | ||||
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What is the impact on 2020 net income?
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a-3. What is the impact on 2021 net income?
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a-4. What is the impact on net income over the two accounting periods?
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Corporate Accounting As Per The Companies Act 2013 Including Rules 2014 And 2015
Authors: M Hanif, A Mukherjee
2nd Edition
935260556X, 9789352605569
