Question
Palmer Corporation, operating as a U.S. corporation, expects to order goods from a foreign supplier at a price of 255,000 pounds, with delivery and payment
Palmer Corporation, operating as a U.S. corporation, expects to order goods from a foreign supplier at a price of 255,000 pounds, with delivery and payment to be made on April 15. On January 15, Palmer purchased a three-month call option on 255,000 pounds and designated this option as a cash flow hedge of a forecasted foreign currency transaction. The option has a strike price of $0.44 per pound and costs $2,550. The spot rate for pounds is $0.44 on January 15 and $0.41 on April 15. What amount will Palmer Corporation report as an option expense in net income during the period January 15 to April 15? |
$2,550.
$10,455.
$765.
$1,275.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started