On March 1, Derby Corporation (a U.S.-based company) expects to order merchandise from a supplier in Norway in three months. On March 1, when the spot rate is $0.20 per Norwegian krone, Derby enters into a forward contract to purchase 685,000 Norwegian kroner at a three-month forward rate of $0.214. Forward points are excluded in assessing the forward contract's effectiveness as a hedge, and are amortized to net income on a straight-line basis. At the end of three months, when the spot rate is $0.211 per Norwegian krone, Derby orders and receives the merchandise, paying 685,000 kroner. The merchandise is sold within 30 days. What amount(s) does Derby report in net income as a result of this cash flow hedge of a forecasted transaction and the related purchase and sale of merchandise?

• Cost of goods sold of $146,590 less foreign exchange gain of $9,590

• Cost of goods sold of $146,590

• Cost of goods sold of $137,000 plus foreign exchange loss of $9,590

• Cost of goods sold of $144,535 plus foreign exchange loss of $2,055