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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