I have here an application:
The company agrees in March to buy in April 2 000 000 USD at the price of 4 monetary units/USD.If in April, one USD = 4.2 monetary units, the company has a gain.
USD Aquisition Cost 8 000 000 m.u.
Aquisition Cost if there hadn't been a forward contract 8 400 000 m.u.
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GAIN 4 000 000 m.u.
Is it just me or is the gain only 400 000? Or is there anything I'm missing about Financial Accounting? Just looking over a Practice Guide and I found this problem.
The company agrees in March to buy in April 2 000 000 USD at the price of 4 monetary units/USD.If in April, one USD = 4.2 monetary units, the company has a gain.
USD Aquisition Cost 8 000 000 m.u.
Aquisition Cost if there hadn't been a forward contract 8 400 000 m.u.
__________________________________________________________
GAIN 4 000 000 m.u.
Is it just me or is the gain only 400 000? Or is there anything I'm missing about Financial Accounting? Just looking over a Practice Guide and I found this problem.