Scenario 10-2
On 4/1/X3, a U.S. Company commits to sell a piece of equipment to a French customer. At that time, the U.S. company enters into a forward contract to sell foreign currency on 8/1/X3 (120 days). Delivery will take place 7/1/X3 with payment due on 8/1/X3. The fiscal year end for the company is 6/30/X3. The sales price of the equipment is 200,000 Euros. Various exchange rates are as follows:
Discount rate is 12%.
-Refer to Scenario 10-2. What is the amount in the Firm Commitment account on 6/30/X3?

Question

Scenario 10-2
On 4/1/X3, a U.S. Company commits to sell a piece of equipment to a French customer. At that time, the U.S. company enters into a forward contract to sell foreign currency on 8/1/X3 (120 days). Delivery will take place 7/1/X3 with payment due on 8/1/X3. The fiscal year end for the company is 6/30/X3. The sales price of the equipment is 200,000 Euros. Various exchange rates are as follows:
  Discount rate is 12%.
-Refer to Scenario 10-2. What is the amount in the Firm Commitment account on 6/30/X3?

Quizplus · Accepted Answer

On 4/1:
 11eac084_3826_bbf9_9d1a_8d2629fca2c7_TB3676_00 On 6/30, fiscal year end, the value of the commitment has changed.
 11eac084_3826_bbfa_9d1a_7143c9441611_TB3676_00 Loss on commitment (debit) results in a credit to Firm Commitment

Scenario 10-2 On 4/1/X3, a U.S. Company Commits to Sell a Piece