Question

A U.S. exporter has a Thai baht account receivable resulting from an export sale on June 1 to a customer in Thailand. The exporter signed a forward contract on June 1 to sell Thai baht and designated it as a cash flow hedge of a recognized Thai baht receivable. The spot rate was $0.022 on that date, and the forward rate was $0.021. Which of the following did the U.S. exporter report in net income?

a. Discount expense
b. Discount revenue
c. Premium expense
d. Premium revenue

Answer 1

Answer: the correct answer is a. discount expense

Explanation: The spot price is the current price at which a commodity is traded. The exporter will report in its net income a discount because in the future the rate is lower.