On October 1, 2014, Foss Company sold inventory to a company inEngland. The sale was for 500,000 British pounds and payment willbe received on March 1, 2015. On October 1, Foss entered into aforward contract to sell 500,000 British pounds on March 1 at theforward rate of $1.68. Spot rates for the British pound are asfollows:
October1 $1.60
December31 1.67
March1 1.65
Foss has a December 31 fiscal year-end.
Required:
Compute each of the following:
1. The dollars tobe received on March 1, 2015, from selling the 500,000 pounds tothe exchange dealer.
2. The dollars thatwould have been received from the account receivable if Foss hadnot indicate the negative hedged the sale contract with the forwardcontract.
3. The discount orpremium on the forward contract.
4. The transactiongain or loss on the exposed asset related to the sale in 2014 and2015.
5. The transactiongain or loss on the forward contract in 2014 and 2015.
6. The amount ofthe discount or premium on the forward contract amortized in 2014and 2015.
On October 1, 2014, Foss Company sold inventory to a company inEngland. The sale was for 500,000 British pounds and payment willbe received on March 1, 2015. On October 1, Foss entered into aforward contract to sell 500,000 British pounds on March 1 at theforward rate of $1.68. Spot rates for the British pound are asfollows:
October1 $1.60
December31 1.67
March1 1.65
Foss has a December 31 fiscal year-end.
Required:
Compute each of the following:
1. The dollars tobe received on March 1, 2015, from selling the 500,000 pounds tothe exchange dealer.
2. The dollars thatwould have been received from the account receivable if Foss hadnot indicate the negative hedged the sale contract with the forwardcontract.
3. The discount orpremium on the forward contract.
4. The transactiongain or loss on the exposed asset related to the sale in 2014 and2015.
5. The transactiongain or loss on the forward contract in 2014 and 2015.
6. The amount ofthe discount or premium on the forward contract amortized in 2014and 2015.
