On June 1, Castejon Corp. purchased merchandise from a Brazilian supplier at a price of 1,200,000 reals. The invoice is due on September 1. O June 1, Castejon signed a forward contract to purchase 1,200,000 reals on September 1. Information you may find useful is below:
Date Spot Rate Forward rate
June 1 $0.085 $0.089
June 30 0.088 0.092
Sept 1 0.082 n/a
Castejon's incremental borrowing rate is 12% per annum. Castejon needs to prepare quarterly financial statements at June 30.