Larson, Inc. sold merchandise for 600,000 FC to a foreign vendor on November 30, 20X5. Payment in foreign currency is due January 31, 20X6. On the same day, Larson signed an agreement with a foreign exchange broker to sell 600,000 FC on January 31, 20X6. Exchange rates to purchase 1 FC are as follows: What will be the recorded amount of the Forward Contract on November 30, 20X5?

Question

Larson, Inc. sold merchandise for 600,000 FC to a foreign vendor on November 30, 20X5. Payment in foreign currency is due January 31, 20X6. On the same day, Larson signed an agreement with a foreign exchange broker to sell 600,000 FC on January 31, 20X6. Exchange rates to purchase 1 FC are as follows:  What will be the recorded amount of the Forward Contract on November 30, 20X5?

Quizplus · Accepted Answer

A memo entry will be recorded at the inception of the contract. The value of the forward contract will be adjusted on December 31 and recorded at that time.