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What is the dollar value of the outstanding pound receivable

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Reference no: EM133004195

Question - ABC Ltd. (ABC), an Australian company, sells products to a customer in the United Kingdom on 1 October 20x1 with payment of £200,000 to be received on 1 April 20x2. ABC enters into a forward contract on 1 October 20x1 to sell £200,000 on 1 April 20x2. Relevant exchange rates between dollar and pound on various dates are as follows:

Where applicable, use 0.95 as the discount factor corresponding to the company's incremental borrowing rate. ABC Ltd. closes its books and prepares financial statements on 31 December each year.

Required (show your calculations) -

A) What is the dollar value of the outstanding pound receivable on 31 December 20x1?

B) What is the change in dollar value of the pound receivable on 1 April 20x2?

C) What is the fair value of the forward contract on 1 October 20x1?

D) What is the fair value of the forward contract on 31 December 20x1?

E) What is the fair value of the forward contract on 1 April 20x2?

F) What is the change in fair value of the forward contract on 1 April 20x2?

Reference no: EM133004195

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