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

question 23

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:

Two-Factor Theory

Two-Factor Theory, in the context of emotion, suggests that emotions are based on physiological arousal and cognitive labels; we interpret our physical responses and decide on the emotion we're feeling.

Epinephrine

Serving as both a hormone and a neurotransmitter, adrenaline is vital for the body's fight-or-flight reaction to threats or stress.

Cannon-Bard Theory

A theory in psychology suggesting that emotions and physiological reactions such as heart rate increase occur simultaneously.

James-Lange Theory

The notion that emotions stem from the body's reactions to different situations.