What amount of foreign currency gain from forward contract

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On December 18, Year 1, Company A plans to purchase a printing press
 or €300,000 when it is completed on February 18, Year 2. The company entered into a forward exchange contract to avoid paying more for the printing press if the exchange rate increases. Relevant exchange rates are as follows:

                                                   Spot rate.               Forward rate

December 18, Year 1.             $1.32.                    $1.25
December 31, Year 1               1.35                       1.31
February 18, Year 2                    1.37

Problem 1: Company A accounts for the forward contract as a cash flow hedge. What amount, if any, of foreign currency gain/loss from the forward contract should Company A report in its income statement for the year ended December 31, Year 1?

A. $0

B. $18,000 gain

C. $18,000 loss

D. $6,000 loss

Reference no: EM132885328

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