Larson Company, a U.S. company, has an India rupee account receivable resulting from an export sale on September 7 to a customer in India. Larson signed a forward contract on September 7 to sell rupees and designated it as a cash flow hedge of a recognized receivable. The spot rate was $0.023, and the forward rate was $0.021. Which of the following did the U.S. exporter allocate over the life of the forward contract?

1. Both discount and premium as increases in net income.
2. Premium as an increase in net income.
3. Discount as an increase in net income.
4. Discount as a decrease in net income.
5. Premium as a decrease in net income.