Question
On December 1, 2009, a U.S.-based company entered into a three-month forward contract to purchase 1 million Mexican pesos on March 1, 2010. The following
On December 1, 2009, a U.S.-based company entered into a three-month forward contract to purchase 1 million Mexican pesos on March 1, 2010. The following are the purchase rates for US dollar per peso Date Spot Rate Forward Rate (March, 2010) December 1, 2009 .088 .084 December 31, 2009 .080 .074 March 1, 2010 .076 The companys borrowing rate is 12 percent. The present value factor for two months at an annual interest rate of 12 percent (1 percent per month) is 0.9803.
How will the U.S. company report the forward contract on its December 31, 2009, balance sheet?
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Managerial accounting
Authors: ramji balakrishnan, k. s i varamakrishnan, Geoffrey b. sprin
1st edition
471467855, 978-0471467854
