What the foreign exchange gain due to hedging instrument

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Stark, Inc. placed an order for inventory costing 500,000 foreign currency (FC) with a foreign vendor on April 15 when the spot rate was 1 FC = P0.683. Stark received the goods on May 1 when the spot rate was 1 FC = P0.687. Also on May 1, Stark entered into a 90-day forward contract to purchase 500,000 FC at a forward rate of 1 FC = P0.693. Payment was made to the foreign vendor on August 1 when the spot rate was 1 FC = P0.696. Stark has a June 30 year-end. On that date, the spot rate was 1 FC = P0.691, and the forward rate on the contract was 1 FC = P0.695. Changes in the current value of the forward contract are measured as the present value of the changes in the forward rates over time. The relevant discount rate is 6%.

Problem 1: The foreign exchange gain on hedging instrument (forward contract) on June 30 amounted to:

Problem 2: The nominal value of the forward contract on June 30 amounted to:

Problem 3: The fair value of the forward contract on June 30 amounted to:

Problem 4: The net decrease on Stark Corp.'s net income on June 30 income statement amounted to:

Problem 5: The foreign exchange gain due to hedging instrument (forward contract) on August 1 amounted to

Reference no: EM132973514

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