On February 1 2015 Linber Company forecasted the

purchase of #6312
On February 1, 2015, Linber Company forecasted the purchase of component parts on May 1,
2015, at a price of 100,000 euros. On that date, Linber entered into a forward contract to
purchase 100,000 euros on May 1, 2015. It designated the forward contract as a cash flow
hedge of the forecasted transaction. The spot rate for euros on February 1, 2015, was $1 per
euro. On May 1, 2015, the forward contract was settled, and the component parts were received
and paid for. The parts were consumed in the second quarter of 2015. Linber's financial
statements reported the following amounts related to this cash flow hedge (credit balances in
parentheses):Required1. On February 1, 2015, what was the U.S. dollar per euro forward rate
to May 1, 2015?2. On March 31, 2015, what was the U.S. dollar per euro forward rate to May 1,
2015?3. Was Linber better off or worse off as a result of having entered into this cash flow
hedge of a forecasted transaction? By what amount?4. What does the total premium expense of
$6,000 reflect?View Solution:
On February 1 2015 Linber Company forecasted the purchase of

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