Question

On March 28, 2020, a U.S. company issues a purchase order to buy merchandise for NZ$100,000. The company will pay the supplier on June 28, 2020, so on March 28, the company enters a forward contract to purchase NZ$100,000 on June 28. The company takes delivery of the merchandise on May 2, 2020. On June 28, 2020, the company acquires NZ$100,000 using the forward contract and pays the supplier. The company sells the merchandise later in the year. The company's accounting year ends December 31. When the merchandise is sold by the U.S. company, cost of goods sold is:

Answer 1

Answer:

A. $73,000

Explanation:

When a company is protected by a hedge it pays the forward exchange rate of the day it entered into the forward contract when payment date has come.

The Question is incomplete. Below are the missing parts and attached picture with spot rate and forward exchange rate.

Select one:

A. $73,000

B. $72,700

C. $73,200

D. $75,000