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What is the value of the forward contract at december

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Reference no: EM132973503

Ward Enterprises sells aircraft seat cushions to most major airplane manufacturers. The company has made sales to a foreign customer for several years and management believes that sales to this customer will continue. On November 30, management initiates a forward contract for 300,000 foreign currency units (FCUs) to hedge the forecasted sales to foreign customer. Historically the sale has occurred around February 1 and payment is received by March 15. The spot and March 15 forward exchange rates on November 30 are P1.139 and P1.138, respectively. Ward prepares quarterly financial statements with a December 31 year-end. The relevant exchange rates and forward contract fair values are as follows: March 15 Forward Contract Date Spot Rate Forward Rate Fair Value

Dec.311141           P1.140         P 600

Feb.     11.136      1.137       P300

Mar.       151.133   1.13       3P1,500

Problem 1. What is the value recognized in the financial accounting records on November 30 for the forward contract?

Problem 2. What is the value of the forward contract at December 31?

Problem 3. What is the gain (loss) on the forward contract included in other comprehensive income at December 31?

Problem 4. What is the value of the forward contract at February 1?

Problem 5. What is the gain (loss) on the forward contract included in other comprehensive income at February 1?

Reference no: EM132973503

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