On October 1, 2021, Eagle Company Forecasts the Purchase of Inventory

question 44

Multiple Choice

On October 1, 2021, Eagle Company forecasts the purchase of inventory from a British supplier on February 1, 2022, at a price of 100,000 British pounds. On October 1, 2021, Eagle pays $1,800 for a three-month call option on 100,000 pounds with a strike price of $2.00 per pound. The option is considered to be a cash flow hedge of a forecasted foreign currency transaction. On December 31, 2021, the option has a fair value of $1,600. The following spot exchange rates apply: What journal entry should Eagle prepare on December 31, 2021?

• A) Option A.
• B) Option B.
• C) Option C.
• D) Option D.
• E) Option E.

---

Definitions:

Achieving Legitimacy

The process of gaining acceptance, credibility, and recognition within a particular context or among a specific audience.

Higher Status

Refers to a position that is considered to be of greater prestige or rank within a hierarchy in a social or professional context.

Actively Cooperative Relationships

Partnerships or interactions where all parties are engaged in working together towards mutual goals or benefits.

Legally Separate Organizations

Entities that are recognized as distinct legal entities under the law, having separate legal rights and obligations.