Happ, Inc. agreed to purchase merchandise from a British vendor on November 30, 20X3. The goods will arrive on January 31, 20X4 and payment of 100,000 British pounds is due at that time. On November 30, 20X3, Happ signed an agreement with a foreign exchange broker to buy 100,000 British pounds on January 31, 20X4. Exchange rates to purchase 1 British pound are as follows: Because of this commitment hedge, Happ, Inc. will record the merchandise at what value when it arrives in January?

Question

Happ, Inc. agreed to purchase merchandise from a British vendor on November 30, 20X3. The goods will arrive on January 31, 20X4 and payment of 100,000 British pounds is due at that time. On November 30, 20X3, Happ signed an agreement with a foreign exchange broker to buy 100,000 British pounds on January 31, 20X4. Exchange rates to purchase 1 British pound are as follows:  Because of this commitment hedge, Happ, Inc. will record the merchandise at what value when it arrives in January?

Quizplus · Accepted Answer

On January 31, Happ will record the purchase of the merchandise at a value of $163,000 (100,000 FC x $1.63).

Happ, Inc Agreed to Purchase Merchandise from a British Vendor on on November