Use the following forward and spot prices for Canadian dollars (C$) to answer the question below. The prices are in U.S. dollars ($/C$).

	Spot rate	Forward rate for 4/15/23 delivery of Canadian dollars
November 15, 2022	$0.705	$0.695
December 31, 2022	0.765	0.750
March 1, 2023	0.720	0.715
April 15, 2023	0.740	0.740

On November 15, 2022, a U.S. company issues a purchase order to a Canadian supplier for merchandise costing C$1,000,000. On the same date, the company enters a forward contract locking in the U.S. dollar purchase price of C$1,000,000, for delivery on April 15, 2023. The forward qualifies as a hedge of the firm commitment. Delivery of the merchandise takes place on March 1, 2023, and the forward contract is closed and payment is made to the supplier on April 15, 2023.

11.

How is the forward contract reported on the companys December 31, 2022, balance sheet?

a. $60,000 liability

b. $55,000 liability

c. $55,000 asset

12.

After delivery, at what amount is the merchandise carried on the U.S. companys books?

a. $700,000

b. $705,000

c. $715,000