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:

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