Question: Hedging a Foreign Currency CommitmentEffects on Income On October 1, 2020, Orchid Foods agreed to sell merchandise to a Swiss customer for 500,000 swiss francs

Hedging a Foreign Currency CommitmentEffects on Income On October 1, 2020,

Hedging a Foreign Currency CommitmentEffects on Income

On October 1, 2020, Orchid Foods agreed to sell merchandise to a Swiss customer for 500,000 swiss francs (CHF). Delivery is to be

made on November 30, 2020, and payment is to be received on January 31, 2021. Concurrently, Orchid

Foods sold CHF500,000 forward for delivery on January 31, 2021, for a total contract price of $513,000.

Orchid Foods closes its books annually on December 31. Current spot rates and forward rates ($/CHF)

for delivery on January 31, 2021, are as follows:

Orchid Foods agreed to sell merchandise to a Swiss customer for 500,000

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