Question

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Brandlin Company of Anaheim, California, purchases materials from a foreign supplier on December 1, 2017, with payment of 17000 korunas to be made on March 1, 2018. The materials are consumed immediately and recognized as cost of goods sold at the date of purchase. On December 1, 2017, Brandlin enters into a forward contract to purchase 17,000 korunas on March 1, 2018. Relevant exchange rates for the koruna on various dates are as follows: Spot Rate Date December 1, 2017 December 31, 2017 March 1, 2018 Forward. Rate (to March 1, 2018) $ 3.575 3.700 N/A 3.75

Answer 1

solution b-2) Impact on 2017. Income Particulars Amount & Sales (17.000 X 3.50) 59.500 foreign exchange Gain = 1700 (1.000 x (3.60 - 3.50) Loss on forward contracting - (2083.14) (17,000x (3.575-3.700) x 0.9803)) Total 59.116.86 b-2) ampact on 2018 Income Particolars Amount ($) foreign exchange Gain = 2.550 (17.000x (3.75-3.60) 1055 on @ forward contract - -(( 17.000 X (3.78 - 3.575))+2083.14 (891-86). Total 1658.14

b-3 ampact of het oncome over both Periods 1658.14 - $59.116-86 + $ = $60.775 (17,000x3.575 caual to this amount that is eaual to cash)