On 4/1/18, a U.S. Company commits to sell a piece of equipment to a French customer. At that time, the U.S. company enters into a forward contract to sell foreign currency on 8/1/18 (120 days)
Delivery will take place 7/1/18 with payment due on 8/1/18 . The fiscal year end for the company is 6/30/18 . The sales price of the equipment is 200,000 Euros. Various exchange rates are as follows: Spot Forward 4/1/18 1FC = $0.60 1FC = $0.58 6/30/18 and 7/1/18 1FC = $0.58 1FC = $0.56 8/1/18 1FC = $0.55 1FC = $0.55 Discount rate is 12%. What is the value of Forward Contract on 6/30? a. 4,000 debit
b. 3,960 debit
c. 4,000 credit
d. 3,960 credit
b
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Indicate whether the statement is true or false
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