In the Case of a Forward Contract to Hedge a Foreign

question 40

Multiple Choice

In the case of a forward contract to hedge a foreign currency transaction,

• A) the gain or loss on the contract should be deferred and included in the measurement of the related foreign currency transaction.
• B) the gain or loss on the contract should be recognized in the period in which the exchange rate changes.
• C) a gain will occur if the foreign currency strengthens against the dollar, and a loss will occur if the foreign currency weakens against the dollar.
• D) the related foreign currency transaction will be recorded on the books at each new exchange rate until the monetary part of the transactions (the receivable or payable) is settled.

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