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Items 27 and 28 are based on the following: On December 12, year 1, Imp Co. entered into three forward exchange contracts, each to purchase

Items 27 and 28 are based on the following: On December 12, year 1, Imp Co. entered into three forward exchange contracts, each to purchase 100,000 euros in ninety days. The relevant exchange rates are as follows: Spot rate Forward rate (for March 12, year 2) November 30, year 1 $.87 $.89 December 12, year 1 .88 .90 December 31, year 1 .92 .93 27. Imp entered into the first forward contract to hedge a purchase of inventory in November year 1, payable in March year 2. At December 31, year 1, what amount of foreign currency transaction gain from this forward contract should Imp include in net income?

A. $0 B. $ 3,000 C. $ 5,000 D. $10,000 E. $12,000 28.

At December 31, year 1, what amount of foreign currency transaction loss should Imp include in income from the revaluation of the Accounts Payable of 100,000 euros incurred as a result of the purchase of inventory at November 30, year 1, payable in March year 2?

A. $0 B. $3,000 C. $4,000 D. $5,000 E. $5,300

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