On November 1, 2020, a U

Multiple Choice

On November 1, 2020, a U.S. company enters into a forward sale contract, in which it agrees to sell €100,000 at a rate of $1.25 on February 1, 2021, when it expects to receive €100,000. The company's accounting year ends December 31. Changes in the value of the forward contract are reported in 2020 income in which one of the following situations?

A) The U.S. company uses the forward contract to hedge a purchase of merchandise, denominated in euros, that is expected to be made on February 1.
B) The U.S. company uses the forward contract to hedge exposure to its investment in a French subsidiary, whose functional currency is the euro.
C) The U.S. company uses the forward contract to hedge a sale of merchandise, denominated in euros, that was made on November 1.
D) The U.S. company uses the forward contract to hedge a sale of merchandise, denominated in euros, that is expected to be made on February 1.