The Forward Exchange Rate Quoted for the Remaining Term of a Forward

question 35

Multiple Choice

The forward exchange rate quoted for the remaining term of a forward contract is used to account for the contract when the forward contract:

• A) extends beyond one year or the current operating cycle.
• B) is a hedge of an identifiable foreign currency commitment.
• C) is a hedge of an exposed net liability position.
• D) was acquired to speculate in foreign currency.

---

Definitions:

Liabilities With Priority

Obligations that have a preferential claim over other types of debts in the event of a liquidation or bankruptcy.

Net Realizable Value

The estimated selling price of goods, minus the costs of their sale or disposal.

Unsecured Creditors

Creditors who have loaned money without any specific collateral, meaning they have a lower priority in case of the debtor's bankruptcy.

Liabilities With Priority

Debts or obligations of a company that are given precedence over others for repayment, often in situations like bankruptcy.