On December 1,20X8,Hedge Company entered into a 60-day speculative forward contract to sell 200,000 British pounds (£)at a forward rate of £1 = $1.78.On the same day it purchased a 60-day speculative forward contract to buy 100,000 euros (€)at a forward rate of €1 = $1.42.
The rates are as follows:
Hedge had no other speculation transactions in 20X8 and 20X9.Ignore taxes.
-Based on the preceding information,what is the effect of the euro speculative contract on 20X9 net income?
A)$4,000 loss
B)$1,000 gain
C)$8,000 gain
D)$2,000 loss

Question

On December 1,20X8,Hedge Company entered into a 60-day speculative forward contract to sell 200,000 British pounds (£)at a forward rate of £1 = $1.78.On the same day it purchased a 60-day speculative forward contract to buy 100,000 euros (€)at a forward rate of €1 = $1.42.
The rates are as follows:
  Hedge had no other speculation transactions in 20X8 and 20X9.Ignore taxes.
-Based on the preceding information,what is the effect of the euro speculative contract on 20X9 net income?
A)$4,000 loss 
B)$1,000 gain 
C)$8,000 gain 
D)$2,000 loss

Quizplus · Accepted Answer

The euro speculative contract resulted in a $1,000 gain for the 20X9 net income. This is determined by analyzing the impact of the contract on the financial performance of the company, taking into account factors such as changes in the value of the euro, the terms of the contract, and how these elements affect the company's net income.

On December 1,20X8,Hedge Company Entered into a 60-Day Speculative Forward