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

question 43

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 is the amount of option expense for 2022 from these transactions?

• A)$1,000.
• B)$1,600.
• C)$2,500.
• D)$2,600.
• E)$0.

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The leading scientific and professional organization representing psychology in the United States, with the aim to advance and disseminate psychological knowledge for the betterment of people.

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The American Psychological Association, a leading scientific and professional organization representing psychology in the United States.