Larson, Inc.sold merchandise for 600,000 FC to a foreign vendor on November 30, 2020.Payment in foreign currency is due January 31, 2021.On the same day, Larson signed an agreement with a foreign exchange broker to sell 600,000 FC on January 31, 2021.Exchange rates to purchase 1 FC are as follows: ?

$$\begin{array} { l r r r }
& \text { Nov. } 30,2020 & \text { Dec. } 31,2020 & \text { Jan. } 31,2021 \
\text { Spot } & \$ 1.49 & \$ 1.46 & \$ 1.43 \
30 \text { day } & \$ 1.48 & \$ 1.43 & \$ 1.44 \
60 \text { day } & \$ 1.47 & \$ 1.40 & \$ 1.42
\end{array}$$ What will be the recorded amount of the Forward Contract on November 30, 2020?

Question

Larson, Inc.sold merchandise for 600,000 FC to a foreign vendor on November 30, 2020.Payment in foreign currency is due January 31, 2021.On the same day, Larson signed an agreement with a foreign exchange broker to sell 600,000 FC on January 31, 2021.Exchange rates to purchase 1 FC are as follows: ?

$$\begin{array} { l r r r } 
& \text { Nov. } 30,2020 & \text { Dec. } 31,2020 & \text { Jan. } 31,2021 \
\text { Spot } & \$ 1.49 & \$ 1.46 & \$ 1.43 \
30 \text { day } & \$ 1.48 & \$ 1.43 & \$ 1.44 \
60 \text { day } & \$ 1.47 & \$ 1.40 & \$ 1.42
\end{array}$$ What will be the recorded amount of the Forward Contract on November 30, 2020?

Quizplus · Accepted Answer

The recorded amount of the Forward Contract on November 30, 2020, will be zero because no exchange rates were purchased on that day. The contract was only signed to sell the foreign currency on January 31, 2021, which is in the next accounting period. The effects of the forward contract will be recorded in the accounting period when the exchange rates are purchased.

Larson, Inc What Will Be the Recorded Amount of the Forward Contract