To Account for a Forward Contract Cash Flow Hedge of a Foreign

question 77

Multiple Choice

To account for a forward contract cash flow hedge of a foreign currency denominated asset or liability at initiation date requires which of the following?

• A) 1. Recognize the transaction (sale or purchase) and foreign currency denominated asset or liability2. Recognize option as an asset (purchase price is fair value)
• B) 1. No entry related to the firm commitment (zero value)2. No entry related to forward contract (zero fair value)
• C) 1. Recognize the transaction (sale or purchase) and foreign currency denominated asset or liability2. No entry related to forward contract (zero fair value)
• D) 1. Recognize the transaction (sale or purchase).2. Recognize the option as a liability.
• E) 1. None. No journal entry is required.

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Definitions:

Secondary Reinforcer

A stimulus that has acquired reinforcing properties through association with a primary reinforcer, such as money becoming valuable through its ability to purchase food or other basic needs.

Salient

Refers to something that stands out prominently or is most noticeable or important.

Shaping

A method of behavior modification that uses rewards to gradually guide an individual's actions toward a desired behavior.

Classical Conditioning

A teaching mechanism where learning arises from the pairing of an environmental cue with a naturally presenting stimulus, leading to a trained reaction.