Recognizing gain or loss in contract agreeing

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Reference no: EM13158234

On August 1st of the current year, Lenz Company writes a contract agreeing to sell Hindman Company 15,000 British pounds at a specific price of $0.69 per pound with delivery in 60 days. Throughout the 60-day period the forward rate varies as follows:

60 days remaining on the contract $0.69
30 days remaining on the contract $0.68
0 days remaining on the contract $0.675

Question 1: For the first 30 day period, Lenz Company would recognize a

A. $149 loss
B. $149 gain
C. $150 loss
D. $150 gain

Question 2: The spot rate at the end of 60 days is $0.675. Assume an 8% discount rate for both Lenz Company and Hindman Company. For the second thirty day period, Hindman would recognize a

A. $225 loss
B. $225 gain
C. $76 loss
D. $76 gain

Reference no: EM13158234

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