A U.S. company anticipates that it will purchase merchandise for 100,000 at the end of August and
Question:
A U.S. company anticipates that it will purchase merchandise for €100,000 at the end of August and pay for it at the time the merchandise is delivered. On May 1, when the spot rate is $1.20 and the forward rate for delivery on August 30 is $1.21, the company enters a forward contract to buy €100,000 on August 30. The forward contract qualifies as a cash flow hedge of the forecasted purchase. The company purchases the merchandise on August 30, when the spot rate is $1.232, and closes the forward contract and pays the supplier €100,000. The company sells the merchandise in October. The company has a December 31 year-end.
At what amount is cost of goods sold reported when the company sells the merchandise in October?
A. | $125,400 | |
B. | $120,000 | |
C. | $121,000 | |
D. | $123,200 |
Intermediate Accounting
ISBN: 978-0132162302
1st edition
Authors: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella