Robert Company sold inventory to an Australian company for 50,000 Australian dollars on April 1,20X0 with settlement to be in 60 days.On the same date,Robert entered into a 60-day forward contract to sell 50,000 Australian dollars at a forward rate of $1.164 in order to manage its exposed foreign currency receivable.The forward contract is not designated as a hedge.The spot rates were as follows:

-Based on the preceding information,what is the overall effect on net income of Robert's use of the forward exchange contract?
A)No effect
B)Net loss of $150
C)Net loss of $200
D)Net gain of $350

Question

Robert Company sold inventory to an Australian company for 50,000 Australian dollars on April 1,20X0 with settlement to be in 60 days.On the same date,Robert entered into a 60-day forward contract to sell 50,000 Australian dollars at a forward rate of $1.164 in order to manage its exposed foreign currency receivable.The forward contract is not designated as a hedge.The spot rates were as follows:
 
-Based on the preceding information,what is the overall effect on net income of Robert's use of the forward exchange contract?
A)No effect 
B)Net loss of $150 
C)Net loss of $200 
D)Net gain of $350

Quizplus · Accepted Answer

The Answer of Robert Company sold inventory to an Australian company for 50,000 Australian dollars on April 1,20X0 with settlement to be in 60 days.On the same date,Robert entered into a 60-day forward contract to sell 50,000 Australian dollars at a forward rate of $1.164 in order to manage its exposed foreign currency receivable.The forward contract is not designated as a hedge.The spot rates were as follows:
 
-Based on the preceding information,what is the overall effect on net income of Robert's use of the forward exchange contract?
A)No effect 
B)Net loss of $150 
C)Net loss of $200 
D)Net gain of $350

Robert Company Sold Inventory to an Australian Company for 50,000