On December 1, 2017, Ringling Company (a U.S.-based company) entered into a three-month forward contract to purchase 1,000,000 pesos on March 1, 2018. The following U.S. dollar per peso exchange rates apply: Date Spot Rate ForwardRate (to March 1, 2018)Dec1, 2017 $0.044 $0.047 Dec 31, 2017 0.046 0.049 March 1, 2018 0.050 N/A Ringling’s incremental borrowing rate is 12 percent. The present value factor for two months at an annual interest rate of 12 percent (1 percent per month) is 0.9803.Which of the following correctly describes the manner in which Ringling Company will report the forward contract on its December 31, 2017, balance sheet? Choose the correct.a. As an asset in the amount of $1,960.60.b. As an asset in the amount of $2,940.90.c. As a liability in the amount of $980.30.d. As a liability in the amount of $2,940.90.
On December 1, 2017, Ringling Company (a U.S.-based company) entered into a three-month forward contract to purchase 1,000,000 pesos on March 1, 2018. The following U.S. dollar per peso exchange rates apply:
Date Spot Rate ForwardRate
(to March 1, 2018)
Dec1, 2017 $0.044 $0.047
Dec 31, 2017 0.046 0.049
March 1, 2018 0.050 N/A
Ringling’s incremental borrowing rate is 12 percent. The present value factor for two months at an annual interest rate of 12 percent (1 percent per month) is 0.9803.
Which of the following correctly describes the manner in which Ringling Company will report the forward contract on its December 31, 2017, balance sheet? Choose the correct.
a. As an asset in the amount of $1,960.60.
b. As an asset in the amount of $2,940.90.
c. As a liability in the amount of $980.30.
d. As a liability in the amount of $2,940.90.
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