On November 1,2017,Cone Company Sold Inventory to a Foreign Customer

question 8

Multiple Choice

On November 1,2017,Cone Company sold inventory to a foreign customer.The account will be settled on March 1 with the receipt of 250,000 foreign currency units (FCU) .On November 1,Cone also entered into a forward contract to hedge the exposed asset.The forward rate is $0.90 per unit of foreign currency.Cone has a December 31 fiscal year-end.Spot rates on relevant dates were: The entry to record the forward contract is

• A)FCU Receivable,225,000; Premium on Forward Contract,7,500; Dollars Payable,232,500
• B)Dollars Receivable,232,500; Discount on Forward Contract,7,500; FCU Payable,225,000
• C)FCU Receivable,232,500; Discount on Forward Contract,7,500; Dollars Payable,225,000
• D)Dollars Receivable,225,000; Discount on Forward Contract,7,500; FCU Payable,232,500

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Definitions:

DCF Approach

The Discounted Cash Flow approach, a valuation method used to estimate the value of an investment based on its future cash flows.

Cost of Equity

The return a company requires to decide if an investment meets capital return requirements, often calculated using the Capital Asset Pricing Model (CAPM).

WACC Calculation

The process of determining a company's Weighted Average Cost of Capital, incorporating the costs of equity, debt, and any other forms of financing.

Semiannually

Occurring twice a year, generally used in the context of payments, interest accruals, or reports.