Use the Following Information to Answer the Question(s) Below

question 23

Multiple Choice

Use the following information to answer the question(s) below.

On December 1, 2014, Thomas Company, a U.S. corporation, purchases inventory from a vendor in Italy for 400,000 euros. Payment is due in 90 days. To hedge the transaction, Thomas signs a forward contract to buy 400,000 euros in 90 days at $1.3670. Thomas uses a discount rate of 6% (present value factor for 30 days = .9950; 60 days = .9901; 90 days = .9851) . Assume the forward contract will be settled net and this is a cash flow hedge. Currency exchange rates are shown below:


-What is the fair value of the forward contract at December 31,2014?

• A)$400.00 liability
• B)$400.00 asset
• C)$396.04 liability
• D)$396.04 asset

---

Definitions:

Environmental Costs

comprise the negative impacts on the environment, including resource depletion and pollution, which are often not reflected in market prices.

Intact Newspapers

Newspapers that have been preserved without any physical alterations, tears, or significant damage.

Serious Pollutant

Substances that cause pollution and can have significant harmful effects on the environment, human health, or both.

Accumulates

The process of gathering or increasing in quantity over time, often used in the context of data, wealth, or substances.