Car Corp. (a U.S.-based company) sold parts to a Korean customer on December 16, 2011, with payment of 10 million Korean won to be received on January 15, 2012. The following exchange rates applied:

Assuming a forward contract was entered into, how would the forward contract be reflected on Car's December 31, 2011 balance sheet?

A) Forward contract (asset).
B) Forward contract (liability).
C) Foreign currency (asset).
D) Foreign currency (liability).
E) Foreign exchange (liability)

Question

Car Corp. (a U.S.-based company) sold parts to a Korean customer on December 16, 2011, with payment of 10 million Korean won to be received on January 15, 2012. The following exchange rates applied:

Assuming a forward contract was entered into, how would the forward contract be reflected on Car's December 31, 2011 balance sheet?

A) Forward contract (asset). 
B) Forward contract (liability). 
C) Foreign currency (asset). 
D) Foreign currency (liability). 
E) Foreign exchange (liability)

Quizplus · Accepted Answer

Car Corp. has entered into a forward contract to receive 10 million Korean won on January 15, 2012. As of December 31, 2011, the forward contract is considered an asset because it is expected to result in a future inflow of cash. Therefore, it should be reflected on the balance sheet as a forward contract (asset).

Car Corp (A U