Reference no: EM132873431
On November 1, 2017, American Company sold inventory to a foreign customer. The account will be settled on March 1 with the receipt of $450,000 foreign currency units (FCU). On November 1, American also entered into a forward contract to hedge the exposed asset. The forward rate is $0.70 per unit of foreign currency.
American has a December 31 fiscal year-end. Spot rates on relevant dates were:
Date Per Unit of Foreign Currency
November 1 $0.73
December 31 0.71
March 1 0.74
Question 1: What will be the adjusted balance in the Accounts Receivable account on December 31, and how much gain or loss was recorded as a result of the adjustment?
A) Receivable Balance, $319,500; Gain/Loss Recorded, $9,000 gain
B) Receivable Balance, $319,500; Gain/Loss Recorded, $9,000 loss
C) Receivable Balance, $333,000; Gain/Loss Recorded, $4,500 gain
D) Receivable Balance, $333,000; Gain/Loss Recorded, $18,000 gain
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