On March 1, 2021, Mattie Company Received an Order to Sell

question 21

Multiple Choice

On March 1, 2021, Mattie Company received an order to sell a machine to a customer in England at a price of 200,000 British pounds. The machine was shipped and payment was received on March 1, 2022. On March 1, 2021, Mattie purchased a put option giving it the right to sell 200,000 British pounds on March 1, 2022 at a price of $380,000. Mattie properly designates the option as a fair hedge of the pound firm commitment. The option cost $2,000 and had a fair value of $2,200 on December 31, 2021. The following spot exchange rates apply: Mattie's incremental borrowing rate is 12%, and the present value factor for two months at a 12% annual rate is 0.9803.What was the net impact on Mattie's 2022 income including the fair value hedge of a firm commitment?

• A) $379,760.60 decrease.
• B) $8,360.60 increase.
• C) $8,360.60 decrease.
• D) $4,390.40 decrease.
• E) $379,760.60 increase.

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Definitions:

Informed Consent

A process by which individuals are fully informed about the procedures, risks, benefits, and alternatives of a certain action or decision, and voluntarily agree to it.

Data Collection

The process of systematically gathering and measuring information from various sources to gain insights or answer questions.

Within-Subject Design

A research design in which the same group of subjects is exposed to all treatments or conditions, allowing direct comparison of different interventions on the same people.

Confounds

Confounds refer to variables that the researcher failed to control or eliminate, which can cause a potential alternative explanation for the findings in a study.