Reference no: EM132908001

On December 12, 2012, Slow Corp. entered into two forward exchange contracts, each to purchase 100,000 euros in ninety days. The relevant exchange rates are as follows:

Date Spot Rates Forward Rates for March 12, 2013,
11/30/12            P87 P89
12/12/12              88 90
12/31/12                  92 93

Problem 1: Slow entered into a second forward contract to hedge a commitment to purchase equipment being manufactured to Slow's specifications. The expected delivery date is March 2013 at which time the settlement is due to the manufacturer. The hedge qualifies as a fair value hedge. On December 31, 2012, what amount of foreign currency transaction gain from this forward contract should Slow include in net income?

Problem 2: Slow entered into a second forward contract to hedge a commitment to purchase equipment being manufactured to Slow's specifications. The expected delivery date is March 2013 at which time the settlement is due to the manufacturer. The hedge qualifies as a fair value hedge. On December 31, 2012, what amount of foreign currency transactions from this forward contract should Slow include in net income?

Problem 3:  Slow entered into a third forward contract due to speculation. On December 31, 2012, what amount of foreign currency transactions from this forward contract should Slow include in net income?