On 6/1/X2, an American firm purchased a inventory costing 100,000 Canadian Dollars from a Canadian firm to be paid for on 9/1/X2. Also on 6/1/X2, the American firm entered into a forward contract to purchase 100,000 Canadian dollars for delivery on 9/1/X2. The exchange rates were as follows: The American firm's fiscal year end is 6/30/X2. The changes in the value of the forward contract should be discounted at 8%. The transaction qualifies as for accounting as a cash flow hedge. What is the amount that will be recognized in earnings in the year ended 6/30/X2?

Question

On 6/1/X2, an American firm purchased a inventory costing 100,000 Canadian Dollars from a Canadian firm to be paid for on 9/1/X2. Also on 6/1/X2, the American firm entered into a forward contract to purchase 100,000 Canadian dollars for delivery on 9/1/X2. The exchange rates were as follows:  The American firm's fiscal year end is 6/30/X2. The changes in the value of the forward contract should be discounted at 8%. The transaction qualifies as for accounting as a cash flow hedge. What is the amount that will be recognized in earnings in the year ended 6/30/X2?

Quizplus · Accepted Answer

11eb11de_92de_5c59_ad38_95933334b2e7_TB2014_00

On 6/1/X2, an American Firm Purchased a Inventory Costing 100,000