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Use the following forward and spot prices for Canadian dollars $($C$$)$ to answer the question below. The prices are in U$.$S$.$ dollars $($$$/$C$$).$

Spot rate Forward rate for $4/15/17$

delivery of Canadian dollars

November $15,2016$ $$1\mathrm{.}3050$ $$1\mathrm{.}2950$

December $31,20161\mathrm{.}36501\mathrm{.}3500$

March $1,20171\mathrm{.}32001\mathrm{.}3150$

April $15,20171\mathrm{.}34001\mathrm{.}3400$

On November $15,2016,$ a U$.$S$.$ company issues a purchase order to a Canadian supplier for merchandise costing C$$500,000.$ On the same date, the company enters a forward contract locking in the U$.$S$.$ dollar purchase price of C$$500,000,$ for delivery on April $15,2017.$ The forward qualifies as a hedge of the firm commitment. Delivery of the merchandise takes place on March $1,2017,$ and the forward contract is closed and payment is made to the supplier on April $15,2017.$

After delivery, at what amount is the merchandise carried on the U$.$S$.$ company$$s books?

$$650,000$

$$652,500$

$$657,500$

Question $5$: Use the following forward and spot prices for Canadian dollars $($C$$)$ to answer the question below. The prices are in U$.$S$.$ dollars $($$$/$C$$).$

Spot rate Forward rate for $4/15/17$

delivery of Canadian dollars

November $15,2016$ $$1\mathrm{.}3050$ $$1\mathrm{.}2950$

December $31,20161\mathrm{.}36501\mathrm{.}3500$

March $1,20171\mathrm{.}32001\mathrm{.}3150$

April $15,20171\mathrm{.}34001\mathrm{.}3400$

On November $15,2016,$ a U$.$S$.$ company issues a purchase order to a Canadian supplier for merchandise costing C$$500,000.$ On the same date, the company enters a forward contract locking in the U$.$S$.$ dollar purchase price of C$$500,000,$ for delivery on April $15,2017.$ The forward qualifies as a hedge of the firm commitment. Delivery of the merchandise takes place on March $1,2017,$ and the forward contract is closed and payment is made to the supplier on April $15,2017.$ How is the forward contract reported on the company$$s December $31,2016,$ balance sheet?

$$30,000$ asset

$$30,000$ liability

$$27,500$ liability

$$27,500$ asset

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