On December 12, 20X5, Dahl Company entered into three forward exchange contracts, each to purchase 100,000 francs in 90 days. The relevant exchange rates are as follows: Spot Rate Forward Rate for March 12, 20X6 December 12, 20X5 $ 0.88 $ 0.90 December 31, 20X5 0.98 0.93 3. Dahl entered into the first forward contract to manage the foreign currency risk from a purchase of inventory in November 20X5, payable in March 20X6. The forward contract is not designated as a hedge. At December 31, 20X5, what amount of foreign currency transaction gain should Dahl include in income from this forward contract? multiple choice $10,000 $0 $5,000 $3,000 4. Dahl entered into the second forward contract to hedge a commitment to purchase equipment being manufactured to Dahl’s specifications. At December 31, 20X5, what amount of foreign currency transaction gain should Dahl include in income from this forward contract? multiple choice $10,000 $0 $5,000 $3,000 5. Dahl entered into the third forward contract for speculation. At December 31, 20X5, what amount of foreign currency transaction gain should Dahl include in income from this forward contract? multiple choice $3,000 $0 $5,000
On December 12, 20X5, Dahl Company entered into three forward exchange contracts, each to purchase 100,000 francs in 90 days. The relevant exchange rates are as follows:
| Spot Rate | Forward Rate for March 12, 20X6 | |
|---|---|---|
| December 12, 20X5 | $ 0.88 | $ 0.90 |
| December 31, 20X5 | 0.98 | 0.93 |
3. Dahl entered into the first forward contract to manage the foreign currency risk from a purchase of inventory in November 20X5, payable in March 20X6. The forward contract is not designated as a hedge. At December 31, 20X5, what amount of foreign currency transaction gain should Dahl include in income from this forward contract?
multiple choice-
$10,000
-
$0
-
$5,000
-
$3,000
4. Dahl entered into the second forward contract to hedge a commitment to purchase equipment being manufactured to Dahl’s specifications. At December 31, 20X5, what amount of foreign currency transaction gain should Dahl include in income from this forward contract?
multiple choice-
$10,000
-
$0
-
$5,000
-
$3,000
5. Dahl entered into the third forward contract for speculation. At December 31, 20X5, what amount of foreign currency transaction gain should Dahl include in income from this forward contract?
multiple choice-
$3,000
-
$0
-
$5,000
-
$10,000
-
-
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