Foreign exchange contract is the contract between the parties which agrees to transfer the amount of foreign exchange at a predetermined rate of exchange on predetermined date. Forward contract: It is the contract between the purchase and the seller where they agree to buy or sell an asset at a fixed price in the future on a specific date. The amount of exchange gain to be reported in income statement of D company.

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Chapter 11, Problem 11.19.3E

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Introduction: Foreign exchange contract is the contract between the parties which agrees to transfer the amount of foreign exchange at a predetermined rate of exchange on predetermined date.

Forward contract: It is the contract between the purchase and the seller where they agree to buy or sell an asset at a fixed price in the future on a specific date.

The amount of exchange gain to be reported in income statement of D company.

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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 1. The following information applies to Denton Incorporated’s sale of 10,000 foreign currency units under a forward contract dated November 1, 20X5, for delivery on January 31, 20X6: 11/1/X5 12/31/X5 Spot rates $ 0.80 $ 0.83 30-day forward rate 0.79 0.82 90-day forward rate 0.78 0.81 1. Denton entered into the forward contract to speculate in the foreign currency. In its income statement for the year ended December 31, 20X5, what amount of loss should Denton report from this forward contract? multiple choice $400 $300 $200 $0 2. On September 1, 20X5, Johnson Incorporated entered into a foreign exchange contract for speculative purposes by purchasing €50,000 for…