Question
Use the following information on the U.S. dollar value of the euro. Spot Rate Forward Rate for April 30, 2021 Delivery October 30, 2020 $
Use the following information on the U.S. dollar value of the euro.
|
Spot Rate | Forward Rate for April 30, 2021 Delivery |
October 30, 2020 | $ 1.250 | $ 1.254 |
December 31, 2020 | 1.258 | 1.256 |
April 30, 2021 | 1.260 | 1.260 |
On October 30, 2020, a U.S. company forecasts that it will purchase merchandise from an Italian supplier at the end of April 2021, in the amount of 100,000, and will pay the supplier on delivery. On October 30, the company enters a forward contract to buy 100,000 on April 30, 2021 and classifies it as a cash flow hedge of the forecasted purchase. On April 30, 2021, the company receives the merchandise, closes the forward contract and pays the supplier. The company's accounting year ends December 31. When the merchandise is sold by the company, what is the cost of goods sold?
A. | $125,000 | |
B. | $126,600 | |
C. | $125,400 | |
D. | $126,000 |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started