On December 1,20X8,Hedge Company Entered into a 60-Day Speculative Forward

question 48

Multiple Choice

On December 1,20X8,Hedge Company entered into a 60-day speculative forward contract to sell 200,000 British pounds (£) at a forward rate of £1 = $1.78.On the same day it purchased a 60-day speculative forward contract to buy 100,000 euros (€) at a forward rate of €1 = $1.42.
The rates are as follows:
Hedge had no other speculation transactions in 20X8 and 20X9.Ignore taxes.
-Based on the preceding information,what is the effect of the British pound speculative contract on 20X8 net income?

• A)$10,000 gain
• B)$6,000 gain
• C)$8,000 gain
• D)$2,000 loss

Understand the basis of income tax expense calculation in financial statements.

Recognize the implications of deferred tax assets and liabilities on financial statement analysis.

Comprehend the role of statutory and cost depletion in tax accounting.

Understand the effect of changes in income tax rates on income tax expense.

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