Question
On November 30, 2019, a U.S. company, with a December 31 year-end, enters a forward purchase contract for 100,000 to be delivered on March 20,
On November 30, 2019, a U.S. company, with a December 31 year-end, enters a forward purchase contract for 100,000 to be delivered on March 20, 2020, when the forward rate for March 20 delivery is $1.23/. The forward contract does not qualify as a hedge. At year-end, the forward rate for delivery on March 30 is $1.21/. The company closes the contract at its expiration date, when the spot rate is $1.24/. At what amount are gains and losses reported in income on the forward in 2019 and 2020?
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Fundamentals of Corporate Finance
Authors: Robert Parrino, David S. Kidwell, Thomas W. Bates
3rd edition
1118845897, 978-1118845899
