On December 1, 2018, BEEN RICHARDS Company entered into two independent forward contracts to sell US$1,200 in
Question:
On December 1, 2018, BEEN RICHARDS Company entered into two independent forward contracts to sell US$1,200 in 90 days or on March 1, 2019. The exchange rates available on various dates are as follows:
| Dec. 1 | Dec. 31 | Mar. 1 |
| 2018 | 2018 | 2019 |
Selling spot rate | ₱40.00 | ₱40.30 | ₱40.10 |
Buying spot rate | 39.60 | 40.00 | 39.90 |
30-day forward selling rate | 40.05 | 40.25 | 40.30 |
30-day forward buying rate | 39.65 | 39.90 | 40.00 |
60-day forward selling rate | 40.10 | 40.20 | 40.40 |
60-day forward buying rate | 39.70 | 39.50 | 40.10 |
90-day forward selling rate | 40.15 | 40.15 | 40.50 |
90-day forward buying rate | 39.75 | 39.70 | 40.20 |
CONTRACT NO. 2
On December 1, 2018, BEN RICHARDS sold inventory for US$1,200 payable on March 1, 2019. The customer will settle the transaction in US Dollars. Also, on the same date, the company entered into the second contract to sell US$1,200 on March 1, 2019.
Determine the following:
The amount of sales to be recorded in December 1, 2018.
CONTRACT NO. 2
On December 1, 2018, BEN RICHARDS sold inventory for US$1,200 payable on March 1, 2019. The customer will settle the transaction in US Dollars. Also, on the same date, the company entered into the second contract to sell US$1,200 on March 1, 2019.
Gain or loss on hedging on 2019 income statement.
Financial Statement Analysis
ISBN: 978-0078110962
11th edition
Authors: K. R. Subramanyam, John Wild