Question: On January 1 2011 Ginseng Inc entered into a forward
On January 1, 2011, Ginseng Inc. entered into a forward contract to purchase U.S. $5,000 for $5,280 Canadian in 30 days. On January 15, the fair value of the contract was $35 (reflecting the present value of the future cash flows under the contract). Assume that the company would like to update its records on January 15. Prepare only necessary journal entries on January 1 and 15, 2011. Explain which financial risks the transaction exposes the entity to.
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