On December 1,2011,Joseph Company,a U Joseph's Incremental Borrowing Rate Is 12 Percent

question 27

Multiple Choice

On December 1,2011,Joseph Company,a U.S.company,entered into a three-month forward contract to purchase 50,000 pesos on March 1,2012,as a fair value hedge of a foreign currency denominated account payable.The following U.S.dollar per peso exchange rates apply: $\begin{array}{|l|c|c|}\hline & & \text { Forward Rate } \\\hline \text { Date } & \text { Spot Rate } & \text { (Mar.1, 2012) } \\\hline \text { December 1, 2011 } & \$ 0.092 & \$ 0.105 \\\hline \text { December 31, 2011 } & \$ 0.090 & \$ 0.095 \\\hline \text { March 1, 2012 } & \$ 0.089 & \text { N/A } \\\hline\end{array}$ Joseph's incremental borrowing rate is 12 percent.The present value factor for two months at an annual interest rate of 12 percent is .9803.Which of the following is included in Joseph's December 31,2011 balance sheet for the forward contract?

• A)$5,146.58 asset.
• B)$5,146.58 liability.
• C)$500 liability.
• D)$490.15 asset.
• E)$490.15 liability.

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Definitions:

Personal Entertainment

Activities or products designed to provide amusement or enjoyment to individuals in their personal time.

Reimbursement

Reimbursement is the process of compensating someone for out-of-pocket expenses they have incurred on behalf of the company or another person, often related to business or travel expenses.

Taxi Fares

Charges levied for the service of transporting individuals in a taxi, typically calculated based on distance, time, or a combination of both.

Payroll

The total amount of money that a company pays to its employees, including wages, salaries, bonuses, and deductions.