Scenario 10-2 On 4/1/X3, a U.S. Company Commits to Sell a Piece

question 19

Multiple Choice

Scenario 10-2
On 4/1/X3, a U.S. Company commits to sell a piece of equipment to a French customer. At that time, the U.S. company enters into a forward contract to sell foreign currency on 8/1/X3 (120 days) . Delivery will take place 7/1/X3 with payment due on 8/1/X3. The fiscal year end for the company is 6/30/X3. The sales price of the equipment is 200,000 Euros. Various exchange rates are as follows:
Discount rate is 12%.
-Refer to Scenario 10-2. What is the value of Forward Contract Payable-FC on 6/30?

• A) 112,000
• B) 112,040
• C) 116,000
• D) none of the above

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Definitions:

Apnea

A temporary cessation of breathing, especially during sleep, which can lead to various health problems.

Cessation

The process of ending or being brought to an end.

Breathing

The process of inhaling oxygen and exhaling carbon dioxide from the atmosphere.

Epiglottis

A flap of cartilage located at the root of the tongue, which is depressed during swallowing to cover the opening of the windpipe.