Amazing Corporation, a U

question 35

Multiple Choice

Amazing Corporation, a U.S. enterprise, sold product to a customer in Wales on October 1, 20x1 for £100,000 with payment required on April 1, 20x2. Relevant exchange rates are: The discount factor corresponding to the company's incremental borrowing rate for 6 months is 0.95.
Assume that Amazing Corporation enters a forward contract on October 1, 2001 to sell £100,000 six months hence, on April 1, 2002. How should Amazing Corporation report the forward contract on its December 31, 2001 financial statements?

• A) Asset $1,950
• B) Liability $1,950
• C) Asset $1,000
• D) Asset $950

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Definitions:

Methoxyethane

An organic compound with the formula C3H8O; an ether that is used as a solvent.

Condensed Structural Formula

A method of displaying the molecular structure of a chemical compound, showing how its atoms are connected with minimal branching or levels of separation.

Methoxymethane

Another name for dimethyl ether, a colorless gas used as an aerosol propellant and a refrigerant.

Ethoxymethane

A chemical compound also known as diethyl ether, characterized as a highly volatile and flammable liquid used as a solvent and anesthetic.