Primo Inc., a U.S.company, ordered parts costing 100,000 rupee from a foreign supplier on July 7 when the spot rate was $.025 per rupee.A one-month forward contract was signed on that date to purchase 100,000 rupee at a rate of $.027.The forward contract is properly designated as a fair value hedge of the 100,000 rupee firm commitment.On August 7, when the parts are received, the spot rate is $.028.At what amount should the payable be carried on Primo's books?
A) $2,000.
B) $2,100.
C) $2,500.
D) $2,700.
E) $2,800.

Question

Quizplus · Accepted Answer

The payable should be carried at the spot rate on the date the parts are received, which is $.028 per rupee. Therefore, 100,000 rupees x $.028 = $2,800.

Primo Inc, a U