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Myway Company sold equipment to a Canadian company for 100,000 Canadian dollars (C$) on January...

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Accounting

Myway Company sold equipment to a Canadian company for 100,000 Canadian dollars (C$) on January 1, 20X9, with settlement to be in 60 days. On the same date, Myway entered into a 60-day forward contract to sell 100,000 Canadian dollars at a forward rate of 1 C$ = $0.94 in order to manage its exposed foreign currency receivable. The forward contract is not designated as a hedge. The spot rates were:

January 1

1 C$ =

$ 0.945

March 1

1 C$ =

$ 0.930

Based on the preceding information, what is the overall effect on net income of Myway's use of the forward exchange contract?

Multiple Choice

Net loss of $1,000

Net gain of $1,500

Net loss of $500

No effect

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