Question

On November 1, 2020, a U.S. company invests in a forward purchase contract for delivery of 1,000,000 Singapore dollars (S$) at $0.75/S$ on February 1, 2021. The spot rate on November 1 is $0.77/S$. At December 31, the end of the accounting year, the forward contract is still outstanding. The year-end spot rate is $0.73. The year-end forward rate for February 1 delivery of Singapore dollars is $0.735. How is the forward contract reported on the U.S. company's year-end balance sheet? A. $15,000 asset B. $40,000 asset C. $35,000 liability D. $15,000 liability

Answer 1

A. $15,000

Step-by-step explanation:

($0.75 - $0.735) x1,000,000 =$15,000.

A forward sale price at $0.75 is an asset when the current sale price is $0.735