Question
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
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 $0.18 per Swedish krona, Pimlico enters into a forward contract to purchase 665,000 Swedish kroner at a three-month forward rate of $0.210. At the end of three months, when the spot rate is $0.207 per Swedish krona, Pimlico orders and receives the merchandise, paying 665,000 kroner. What amount does Pimlico report in net income as a result of this cash flow hedge of a forecasted transaction? $19,950 Premium Expense plus a $17,955 positive Adjustment to Net Income when the merchandise is purchased. $1,995 Premium Expense plus a $15,960 negative Adjustment to Net Income when the merchandise is purchased. $1,995 Premium Expense plus a $1,995 positive Adjustment to Net Income when the merchandise is purchased. $19,950 Discount Expense plus a $15,960 positive Adjustment to Net Income when the merchandise is
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