On December 1, 2011, Joseph Company, a U.S. company, entered into a three-month forward contract to purchase 50,000 pesos on March 1, 2012, as a fair value hedge of a foreign currency denominated account payable. The following U.S. dollar per peso exchange rates apply: Date : December 1, 2011 Spot Rate : $0.092 Forward Rate (March 1, 2012) : $0.105

Date : December 31, 2011 Spot Rate : $0.090 Forward Rate : (March 1, 2012) : $0.095

Date : March 1, 2012 Spot Rate : $0.089 Forward Rate : (March 1, 2012) : N/A

Question :

Joseph's incremental borrowing rate is 12 percent. The present value factor for two months at an annual interest rate of 12 percent is .9803. Which of the following is included in Joseph's December 31, 2011 balance sheet for the forward contract? A. $5,146.58 asset. B. $5,146.58 liability. C. $500 liability. D. $490.15 asset. E. $490.15 liability.

I need detailed help with steps as to how E was calculated