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What amount of foreign currency gain or loss

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Question - On December 18, Year 1, Company A plans to purchase a printing press for €300,000 when it is completed on February 18, Year 2.  The company entered into a forward exchange contract to avoid paying more for the printing press if the exchange rate increases.  Relevant exchange rates are as follows:

 

Spot rate

Forward rate

December 18, Year 1

$1.32

$1.25

December 31, Year 1

1.35

1.31

February 18, Year 2

1.37

Company A accounts for the forward contract as a cash flow hedge. What amount, if any, of foreign currency gain/loss from the forward contract should Company A report in its income statement for the year ended December 31, Year 1?

A. $0

B. $18,000 gain

C. $18,000 loss

D. $6,000 loss

Reference no: EM133189458

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