On November 1,2014,Balloon Company Sold Some Limited Edition Art Prints

question 44

Multiple Choice

On November 1,2014,Balloon Company sold some limited edition art prints to Sitake Company for ¥47,850,000 to be paid on January 1,2015.The current exchange rate on November 1,2014,was ¥110=$1,so the total payment at the current exchange rate would be equal to $435,000.Balloon entered into a forward contract with a large bank to guarantee the number of dollars to be received.According to the terms of the contract,if ¥47,850,000 is worth less than $435,000,the bank will pay Balloon the difference in cash.Likewise,if ¥47,850,000 is worth more than $435,000,Balloon must pay the bank the difference in cash.Assuming the exchange rate on December 31,2014 is ¥115=$1,what amount will Balloon disclose as the fair value of the forward contract on December 31,2014 (answers rounded to the nearest dollar) ?

• A) $0
• B) $18,913
• C) $20,714
• D) $416,087

---

Definitions:

Intentional Tort

A wrongful act done deliberately with the intention of causing harm or damage, leading to civil legal liability.

Conversion

The act of changing something from one form or use to another, in legal terms, often referring to unauthorized possession or use of property.

Automobile

A road vehicle, typically with four wheels, powered by an internal combustion engine or electric motor, designed to transport people.

Legal Action

A formal proceeding in which a case is brought before a court for decision-making regarding an issue or dispute.