Question
7. Atherton, Inc., a U.S. company, expects to order goods from a foreign supplier at a price of 100,000 lira, with delivery and payment to
7. Atherton, Inc., a U.S. company, expects to order goods from a foreign supplier at a price of 100,000 lira, with delivery and payment to be made on April 17. On January 17, Atherton purchased a three-month call option on 100,000 lira and designated this option as a cash flow hedge of a forecasted foreign currency transaction. The following exchange rates apply:
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Option strike price | $ | 4.34 |
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Option cost | $ | 5,000 |
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January 17 Spot Rate | $ | 4.34 |
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April 17 Spot Rate | $ | 4.26 |
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What amount will Atherton include as an option expense in net income for the period January 17 to April 17?
A) $5,000.
B) $4,340.
C) $4,000.
D) $4,260.
E) $5,260.
8. Which of the following statements best describes the management approach that the FASB has adopted in its segment reporting standard?
a. The management approach requires disclosures for the same business units that are routinely reported to senior management.
b. The management approach requires disclosures for the same business units that are routinely reported to analysts.
c. The management approach requires disclosures for the same business units that are routinely reported to lenders and other creditors.
d. The management approach requires disclosures for the same business units that are routinely reported in conference calls.
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