On 6/1/X2, an American Firm Purchased a Inventory Costing 100,000

question 14

Multiple Choice

On 6/1/X2, an American firm purchased a inventory costing 100,000 Canadian Dollars from a Canadian firm to be paid for on 8/1/X2. Also on 6/1/X2, the American firm entered into a forward contract to purchase 100,000 Canadian dollars for delivery on 8/1/X2. The exchange rates were as follows: The American firm's fiscal year end is 6/30/X2. The changes in the value of the forward contract should be discounted at 8%. The transaction qualifies as for accounting as a cash flow hedge. What is the total amount that will be recognized in other comprehensive income in the year ended 6/30/X2?

• A)$1,987 debit
• B)$2,320 credit
• C)$320 credit
• D)$2,000 debit

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