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Use the following information for Problems 15 through 17. On September 1, 2011, Jensen Company received an order to sell a machine to a customer
Use the following information for Problems 15 through 17. On September 1, 2011, Jensen Company received an order to sell a machine to a customer in Canada at a price of 100,000 Canadian dollars. Jensen shipped the machine and received payment on March 1, 2012. On September 1, 2011, Jensen purchased a put option giving it the right to sell 100,000 Canadian dollars on March 1, 2012, at a price of $80,000. Jensen properly designated the option as a fair value hedge of the Canadian dollar firm commitment. The option cost $2,000 and had a fair value of $2,300 on Jensen Companys incremental borrowing rate is 12 percent. The present value factor for two months at an annual interest rate of 12 percent (1 percent per month) is 0.9803. 15. What was the net impact on Jensen Companys 2011 income as a result of this fair value hedge of a firm commitment
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