Car Corp. (a U.S.-based company) sold parts to a Korean customer on December 16, 2013, with payment
Question:
Car Corp. (a U.S.-based company) sold parts to a Korean customer on December 16, 2013, with payment of 10 million Korean won to be received on January 15, 2012. The following exchange rates applied:
Date : December 16th, 2013 Spot Rate : $0.00092 Forward Rate to January 15th : $0.00098
Date : December 31st, 2013 Spot Rate : $0.00090 Forward Rate to January 15th : $0.00093
Date : January 15th, 2013 : Spot Rate : $0.00095 Forward Rate to January 15th : $0.00095
Question :
Assuming a forward contract was entered into, at what amount should the forward contract be recorded at December 31, 2013? Assume an annual interest rate of 12% and a fair value hedge. The present value for one month at 12% is .9901.
A. $200.
B. $295.
C. $495.
D. $500.
E. $9,300.
Advanced Accounting
ISBN: 978-1259444951
13th edition
Authors: Joe Ben Hoyle, Thomas Schaefer, Timothy Doupni