On March 1, Pimlico Corporation (a U.S.-based company) expects to order merchandise from a supplier in Sweden in three months. On March 1, when the spot rate is $0.14 per Swedish krona, Pimlico enters into a forward contract to purchase 622,500 Swedish kroner at a three-month forward rate of $0.160. At the end of three months, when the spot rate is $0.156 per Swedish krona, Pimlico orders and receives the merchandise, paying 622,500 kroner. What amount does Pimlico report in net income as a result of this cash flow hedge of a forecasted transaction?

(a) $2,490 premium expense plus a $7,470 negative adjustment to net income when the merchandise is purchased.

(b) $12,450 premium expense plus $9,960 positive adjustment to net income when the merchandise was purchased.

(c) $2,490 premium expense plus a $2,490 positive adjustment to net income when the merchandise was purchased.

(d) $12,450 discount expense plus a $7,470 positive adjustment to net income when the merchandise was purchased.