Question

how do you find foward contract and gain on forward contract? confused cant figure it out for 9/30. also how would you figure it out on 10/31? can you please show work. thanks

Date September 15 September 30 October 31 Spot Rate $ 1.25 1.30 1.35 Forward Rate to October 31 $ 1.31 1.34 1.35 Call Option Premium for October 31 (strike price $1.25) $ 0.040 0.075 0.100

Answer 1

As per SSAP20-

		Amt ($)	Amt ($)
15-Sep	Purchases A/c	218750
	To French Supplier A/c		218750
	(175000 euros * 1.25)
15-Sep	Purchases A/c	262000
	To French Supplier A/c		262000
	(200000 euros * 1.31)
	At 30 Sep, the balance sheet date, no translation of the debtor is required as the forward rate has been used.
30-Sep	Exchange loss (P/L)	8750
	To French Supplier A/c		8750
	(175000 euros *(1.30-1.25) - Restatement
31-Oct	French Supplier A/c	262000
	To Cash A/c		262000
	(200000 euros * 1.31)
31-Oct	French Supplier A/c	227500
	Exchange loss (P/L)	8750
	To Cash A/c		236250
	(175000 euros * (1.35-1.30))