### 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

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