Lawrence Co. ordered parts costing FC100,000 from a foreign supplier on May 12 when the spot rate was $0.20 per FC. A one-month forward contract was signed on that date to purchase FC100,000 at a forward rate of $0.21. The forward contract is properly designated as a FV hedge of the FC100,000 firm commitment. On June 12, when the company receives the parts, the spot rate is $0.23. At what amount should Lawrence Company carry the parts inventory on its books?

Lawrence Co. ordered parts costing FC100,000 from a foreign supplier on May 12 when the spot rate was $0.20 per FC. A one-month forward contract was signed on that date to purchase FC100,000 at a forward rate of $0.21. The forward contract is properly designated as a FV hedge of the FC100,000 firm commitment. On June 12, when the company receives the parts, the spot rate is $0.23. At what amount should Lawrence Company carry the parts inventory on its books?

Lawrence Co. ordered parts costing FC100,000 from a foreign supplier on May 12 when the spot rate was $0.20 per FC. A one-month forward contract was signed on that date to purchase FC100,000 at a forward rate of $0.21. The forward contract is properly designated as a FV hedge of the FC100,000 firm commitment. On June 12, when the company receives the parts, the spot rate is $0.23. At what amount should Lawrence Company carry the parts inventory on its books?


A) $20,000

B) $21,000

C) $22,000

D) $23,000


Answer: D