Gain or Loss on Speculative Forward Exchange Contract
On December 1,20X1, Sycamore Company acquired a 90-day speculative forward contract to sell * 120,000 European euros (€) at a forward rate of €1 = $0.58. The rates are as follows:
|
| Forward Rate |
Date | SpotRate | for March 1 |
December 1, 20X1 | €1 = $0.60 | €1 = $0.58 |
December 31, 20X1 | €1 = 0.59 | €1 = 0.56 |
March 1, 20X2 | €1 = 0.57 |
|
Required
a. Prepare a schedule showing the effects of this speculation on 20X1 income before income taxes.
b. Prepare a schedule showing the effects of this speculation on 20X2 income before income taxes.
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