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:

Female Weaver

A woman specializing in weaving, an ancient craft involving the creation of textiles or fabric on a loom through the interlacing of threads.

Textiles

Fabrics or cloths produced by weaving or knitting fibers together, an important part of human civilization and economic activity.

Ancestral Puebloan

Refers to the ancient Native American culture predominantly found in the Four Corners region of the United States, recognized for their unique cliff dwellings and kivas.

Mural

A wall painting.