Question

Car Corp. (a U.S.-based company) sold parts to a Korean customeron December 16, 2011, with payment of 10 million Korean won to bereceived on January 15, 2012. The following exchange ratesapplied:

Date : December 16th, 2011 Spot Rate : $0.00092 ForwardRate to January 15th : $0.00098

Date : December 31st, 2011 Spot Rate : $0.00090 ForwardRate to January 15th : $0.00093

Date : January 15th, 2012 : Spot Rate : $0.00095 ForwardRate to January 15th : $0.00095

. Assuming a forward contract was not entered into, what wouldbe the net impact on Car Corp.'s 2011 income statement related tothis transaction?

A. $500 (gain).

B. $500 (loss).

C. $200 (gain).

D. $200 (loss).

E. $- 0 –

I need detailed help with steps and explained calculationsas to why answer is D). Be ready for follow up questions onyour answer.

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