On May 1, 2013, Mosby Company Received an Order to Sell

question 5

Multiple Choice

On May 1, 2013, Mosby Company received an order to sell a machine to a customer in Canada at a price of 2,000,000 Mexican pesos. The machine was shipped and payment was received on March 1, 2014. On May 1, 2013, Mosby purchased a put option giving it the right to sell 2,000,000 pesos on March 1, 2014 at a price of $190,000. Mosby properly designates the option as a fair value hedge of the peso firm commitment. The option cost $3,000 and had a fair value of $3,200 on December 31, 2013. The following spot exchange rates apply: $\begin{array}{|l|c|}\hline \text { Date } & \text { Spot Rate } \\\hline \text { May 1,2013 } & \$ 0.095 \\\hline \text { December 31,2013 } & \$ 0.094 \\\hline \text { March 1,2014 } & \$ 0.089 \\\hline\end{array}$ Mosby's incremental borrowing rate is 12 percent, and the present value factor for two months at a 12 percent annual rate is .9803. What was the impact on Mosby's 2013 net income as a result of this fair value hedge of a firm commitment?

• A)$1,760.60 decrease.
• B)$1,960.60 decrease.
• C)$1,000.00 decrease.
• D)$1,760.60 increase.
• E)$1,960.60 increase.

Understand the role and creation of administrative agencies through enabling statutes.

Know the appeals process for decisions made by administrative law judges.

Identify various types of orders and actions by administrative agencies, such as subpoenas and rule-making procedures.

Recognize the functions and affiliations of federal executive agencies within government departments.

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Definitions:

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