On June 1, 2016, TCO enters into a forward agreement with XYZ to buy 100,000 gallons of fuel oil at $2.40 on December 31, 2016. At the time of inception of the forward, the price of fuel oil is $2.45. On December 31, 2016, the price of fuel oil is $2.48. The contract allows for net settlement. Required What is the net settlement on the forward contract?
On June 1, 2016, TCO enters into a forward agreement with XYZ to buy 100,000 gallons of fuel oil at $2.40 on December 31, 2016. At the time of inception of the forward, the price of fuel oil is $2.45. On December 31, 2016, the price of fuel oil is $2.48. The contract allows for net settlement. Required What is the net settlement on the forward contract?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On June 1, 2016, TCO enters into a forward agreement with XYZ to buy 100,000 gallons of fuel oil at $2.40 on December 31, 2016. At the time of inception of the forward, the price of fuel oil is $2.45. On December 31, 2016, the price of fuel oil is $2.48. The contract allows for net settlement.
Required
What is the net settlement on the forward contract?
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