Curtis Purchased Inventory on December 1, 2020

question 78

Multiple Choice

Curtis purchased inventory on December 1, 2020. Payment of 250,000 stickles was to be made in sixty days. Also on December 1, Curtis signed a contract to purchase §250,000 in sixty days. The spot rate was §1 = 0.33682, and the 60-day forward rate was §1 = $0.36842. On December 31, the spot rate was §1 = 0.32438 and the 30-day forward rate was §1 = 0.36386. Assume an annual interest rate of 12% and a fair value hedge. The present value for one month at 12% is 0.9901.In the journal entry to record the establishment of a forward exchange contract, at what amount should the Forward Contract account be recorded on December 1?

• A) $90,965.
• B) $84,205.
• C) $81,095.
• D) $92,105.
• E) $0.

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Definitions:

Carrying Amount

The book value of assets and liabilities recognized in a company's financial statements, calculated as the original cost minus any depreciation, amortization, or impairment costs.

Equity Method

An accounting technique used to record investments in other companies, recognizing income and changes in investment value.

Dividends

Distributions of earnings provided by a company to its stockholders, typically coming from the company's profits.

Goodwill

The intangible asset that arises when a company acquires another business for more than the fair value of its net identifiable assets, representing factors like reputation, brand, and customer relationships.