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For accounting purposes, what type of hedge is the forward contract? a. A cash flow hedge b. A currency hedge C. A fair value hedge d. A self-sustaining hedge

For accounting purposes, what type of hedge is the forward contract? a. A cash flow hedge b. A currency hedge C. A fair value hedge d. A self-sustaining hedge

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Accounting - The spot rate was US$1 = C$1.02, on August 1, 2019, Andy Corporation in Canada ordered equipment from an American supplier for US$260,000. Delivery was scheduled for the month of September, with payment in full on delivery. Upon placing the order, Andy immediately entered into a forward contract with its bank to purchase US$260,000 on September 15, 2019 at the forward rate of US$ = C$1.01. The equipment was received on September 15, 2019, when the spot rate was US$ = C$0.99. For accounting purposes, what type of hedge is the forward contract? a. A cash flow hedge b. A currency hedge C. A fair value hedge d. A self-sustaining hedge
Transcribed Image Text:Accounting - The spot rate was US$1 = C$1.02, on August 1, 2019, Andy Corporation in Canada ordered equipment from an American supplier for US$260,000. Delivery was scheduled for the month of September, with payment in full on delivery. Upon placing the order, Andy immediately entered into a forward contract with its bank to purchase US$260,000 on September 15, 2019 at the forward rate of US$ = C$1.01. The equipment was received on September 15, 2019, when the spot rate was US$ = C$0.99. For accounting purposes, what type of hedge is the forward contract? a. A cash flow hedge b. A currency hedge C. A fair value hedge d. A self-sustaining hedge
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