Find amount of forward loss should parker company recognize

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Reference no: EM132775576

On January 2, 2020, Parker Company enters into a forward contract to purchase on January 2, 2022, a specified number of barrels of oil at a fixed price. Parker Company does not pay anything to enter into the forward contract on January 2, 2020. Parker Company does not designate the forward contract as a hedging instrument. At the end of 2020, the fair value of the forward contract has increased to P400,000 and at the end of 2021 its fair value has declined to P350,000.

Problem 1: Assuming Parker Company is speculating that the price of oil will increase and plans to net settle the contract if the price increases, what amount of forward loss should Parker Company recognize at December 31, 2021 statement of comprehensive income?

Group of answer choices

a. P400,000

b. P350,000

c. P50,000

d. None

Reference no: EM132775576

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