Interfast Corporation, a fastener manufacturer, has recently been expanding its sales through exports to foreign markets. Earlier this year, the company negotiated the sale of several thousand cases of fasteners to a wholesaler in the country of Loznia. The customer is unwilling to assume the risk of having to make payment in Canadian dollars. Desperate to enter the Loznian market, the vice-president for international sales agrees to denominate the sale in lrubles (LR), the national currency of Loznia. The current exchange rate for the lruble is $2. In addition, the customer indicates that he cannot make payment until all of the fasteners have been sold. Payment of LR200,000 is scheduled for six months from the date of sale.
Required:
Have the accountants made a mistake? Does the company have a loss, a gain, or both from this forward contract? Explain.