2. What is the amount of exchange gain or (loss) recognized with respect to Forward Contract on November 1, 2016?A. (4,000) C. 4,000B. 9,000 D. (9,000)The correct answer is C, Please explain why. Problem 6: (Forward Contracts - Hedging an Exposed Liability)OCDC Enterprise purchases inventory from a foreign supplier on September 1, 2016 with payment due on December31, 2016. The transaction will be settled in 1,000,000 foreign currency units (FCUS). Management of OCDCimmediately enters into a forward contract to hedge this transaction. The relevant exchange rates and forwardcontract fair values are as follows:Spot RateNov. 1 Forward RateForward Contract Fair ValuePODateSept 1Nov. 1P1.120P1.1241.1291.1401.1284,00016,000Dec. 311.140

Loss or gain can be calculated by difference on the exchange rate on two dates.

Answered: What is the amount of exchange gain or…

What is the amount of exchange gain or (loss) recognized with respect to Forward Contract on November 1, 2016? A. (4,000) C. 4,000 B. 9,000 D. (9,000)

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

Chapter13: Marketable Securities And Derivatives

Section: Chapter Questions

Problem 22E

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