Problem 9: On Sept 1, 2020, 2B Co. anticipated the purchase of merchandise from a foreign vendor at a price of $1,000. The purchase would probably occur on Jan 30,2021. On Oct 1,2020, 2B Co. forecasted the sale of merchandise to a foreign customer at a price of $3,000. The sale would probably occur on Mar 31, 2021.

On Sept 1, 2020, 2B Co. purchased a 150-day call option to buy $1,000 at an option price of P20 by paying option premium of P200. On Oct 1, 2020, 2B Co. purchased a 180-day put option to sell $3,000 at a strike price of P24 by paying option premium of P300. The company prepares calendar year financial statements.

The forecasted purchase and sales transaction occurred on the date anticipated. For the year ended Dec 31, 2021, all foreign currency receivables are collected but only 80% of purchased inventories from the foreign vendor were sold to third person.

The following additional data are provided:

9/1/2020 10/1/2020 12/31/2020 1/30/2021 3/31/2021

Buying spot rate P23 P24 P21 P22.50 P22

Selling spot rate P20 P21 P24 P23 P21

Fair value of put option ? ? P10,000 ? ?

Fair value of call option ? ? P4,500 ? ?

1. What is the net foreign currency gain or loss in Other Comprehensive Income of Statement of Comprehensive Income for the year ended Dec 31, 2020?

a. 13,000 net gain

b. 1,000 net gain

c. 14,000 net gain

d. 2,800 net gain

1. What is the net foreign currency gain or loss in Other Comprehensive Income of Statement of Comprehensive Income for the year ended Dec 31, 2021?

a. 4,000 net loss

b. 1,500 net loss

c. 5,500 net loss

d. 5,700 net loss

1. What is the net cumulative Other Comprehensive Income in Dec 31, 2021?

a. 600 cumulative credit

b. 6,600 cumulative credit

c. 2,400 cumulative credit

d. 9,000 cumulative credit