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?https://newconnect.mheducation.com/flow/connect.html Saved Help Save&Exit; On December 1,2017. Ringling Company (a U.S-based company) entered into a three-month forward contract to purchase 1.150,000 pesos on March 1, 2018. The following U.S. dollar per peso exchange rates apply Date December 1, 2017 December 31, 2017 March 1, 2818 Spot Rate $8.818 8.020 8.824 Forward Rate (to March 1, 2018) $e.821 8.023 N/A Ringling's incremental borrowing rate is 16 percent. The present value factor for two months at an annual interest rate of 16 percent (1 percent per month) is 0.9739 Which of the following correctly describes the manner in which Ringling Company will report the forward contract on its December 31, 2017, balance sheet? Multiple Choice Prev 1 of 14 Next> o search 6 8

Explanation / Answer

the forward contract has a positive fair value on December 31, 2017, and is an asset. So Calculation , [($0.021 – $0.023) × 1,150,000 × 0.9739] = 2240 The forward contract must be reported at its fair value discounted for two months at 16%,

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