How Should Discounts or Premiums on Forward Contracts Be Treated

question 39

Multiple Choice

How should discounts or premiums on forward contracts be treated if the derivative is hedging a foreign-currency-denominated asset?

• A) Carried on the balance sheet until the contract is completed
• B) Included in income in the period the derivative is acquired
• C) Amortized over the life of the forward contract
• D) None of the above

Understand the recording of sales transactions and the impact of sales discounts on financial statements.

Calculate income from operations and understand its components.

Distinguish between periodic and perpetual inventory systems and their impact on financial statements.

Calculate and understand the significance of gross profit in business operations.

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