A is corrent. ASC Topic 815 requires fair market valuation for forward exchange contracts. Each period this is accomplished by marking the forward exchange contract to market using the forward rate at the financial statement date. At 12/31/Y2 the forward rate is $ .93. The difference between $ .93 and $.87, the forward rate on the date the contract was entered into, times 100,000 Swiss francs is $6,000, the forward exchange gain. The journal entry would be as follows:
| Forward contract receivable | 6,000 | |
| Forward contract gain | | 6,000 |
The $6,000 forward exchange contract gain would be included in year 2 net income.B is incorrect. ASC Topic 815 requires fair market valuation for forward exchange contracts. Each period this is accomplished by marking the forward exchange contract to market using the forward rate at the financial statement date. At 12/31/Y2 the forward rate is $ .93. The difference between $ .93 and $.87, the forward rate on the date the contract was entered into, times 100,000 Swiss francs is $6,000, the forward exchange gain. The journal entry would be as follows:
| Forward contract receivable | 6,000 | |
| Forward contract gain | | 6,000 |
The $6,000 forward exchange contract gain would be included in year 2 net income.C is incorrect. ASC Topic 815 requires fair market valuation for forward exchange contracts. Each period this is accomplished by marking the forward exchange contract to market using the forward rate at the financial statement date. At 12/31/Y2 the forward rate is $ .93. The difference between $ .93 and $.87, the forward rate on the date the contract was entered into, times 100,000 Swiss francs is $6,000, the forward exchange gain. The journal entry would be as follows:
| Forward contract receivable | 6,000 | |
| Forward contract gain | | 6,000 |
The $6,000 forward exchange contract gain would be included in year 2 net income.
D is incorrect. ASC Topic 815 requires fair market valuation for forward exchange contracts. Each period this is accomplished by marking the forward exchange contract to market using the forward rate at the financial statement date. At 12/31/Y2 the forward rate is $ .93. The difference between $ .93 and $.87, the forward rate on the date the contract was entered into, times 100,000 Swiss francs is $6,000, the forward exchange gain. The journal entry would be as follows:
| Forward contract receivable | 6,000 | |
| Forward contract gain | | 6,000 |
The $6,000 forward exchange contract gain would be included in year 2 net income.
