sold parts to a Korean customer on December 16, 2021, with payment of 20 million Korean won to be received on January 15, 2022. The following exchange rates applied: Date Spot Rate Forward Rate to Jan.15 December 16, 2021 $ 0.00082 $ 0.00089 December 31, 2021 0.00080 0.00083 January 15, 2022 0.00086 0.00086 Assuming a forward contract was entered into on December 16, at what amount should the forward contract be recorded at December 31, 2021

the  amount of the forward contract be recorded is $1,188

Explanation:

The computation of the amount of the forward contract be recorded is shown below

= (Forward rate as on Dec 16 - forward rate as on Dec 31) ×  Payment amount × present value of one month at 12%

= ($0.00089 - $0.00083) × $20,000,000 × 0.9901

= $0.00006 × $20,000,000 × 0.9901

= $1,200 × 0.9901

= $1,188

Hence, the  amount of the forward contract be recorded is $1,188

We simply applied the above formula so that the correct value could come

And, the same is to be considered