Torres Corporation (a U.S.-based company) expects to order goods from a foreign supplier at a price of 106,000 pounds, with delivery and payment to be made on September 20. On July 20, Torres purchased a two-month call option on 106,000 pounds and designated this option as a cash flow hedge of a forecasted foreign currency transaction. The option has a strike price of $1.35 per pound and costs $1,060. The spot rate for pounds is $1.35 on June 20 and $1.40 on September 20. What amount will Torres Corporation report as an option expense in net income for the quarter ended September 30?

Multiple Choice

$530.

$5,300.

$2,300.

$1,060.