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What amount of gain on forward contract should ethel company

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Reference no: EM132769159

Problem 1: On January 31, 2020, Ethel Company enters into a contract with San Miguel Corp. to receive the fair value of 2,000 of Ethel Company's own outstanding shares as of February 1, 2021 in exchange for a payment of P212,000 in cash or an equivalent of P106 per share on February 1, 2021. The contract will be settled net in cash. At the time of the contract, shares of Ethel Company are selling at P100 per share; the present value of the forward contract is zero. On December 31, 2020, shares of Ethel Company are selling at P115 and the forward contract has a fair value of P13,800. On February 1, 2021, shares of Ethel Company are selling at P108 and the fair value of the forward contract is P4,000.What amount of gain on forward contract should Ethel Company recognize on December 31, 2020?

a. P4,000

b. None

c. P9,800

d. P13,800

Reference no: EM132769159

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