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:

British Pounds

The British pound is the official currency of the United Kingdom, symbolized as GBP, and is one of the world's major currencies traded in foreign exchange markets.

Canadian Dollars

The currency of Canada, represented by the symbol CAD, and used throughout the country for all financial transactions.

Inflation Rate

The inflation rate is the percentage increase in the general price level of goods and services in an economy over a period of time.

Exchange Rate

The price of one country's currency in terms of another's, used in international trade and investment.