Forward Rate (to April 30, 2018) Spot Rate $0.21 0.19 0.18 Date November 1, 2017 December 31, 2017 April 30, 2018 $0.20 0.17 N/A
On November 1, 2017, Bernard Company (a U.S.-based company) sold merchandise to a foreign customer for 100,000 FCUs with payment to be received on April 30, 2018. At the date of sale, Bernard entered into a six-month forward contract to sell 100,000 FCUs. The company properly designates the forward contract as a cash flow hedge of a foreign currency receivable. The following exchange rates apply:
Bernard’s incremental borrowing rate is 12 percent. The present value factor for four months at an annual interest rate of 12 percent (1 percent per month) is 0.9610.
a. Prepare all
b. What is the impact on net income in 2017?
c. What is the impact on net income in 2018?
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