On March 1, 2013, Mattie Company Received an Order to Sell

question 10

Multiple Choice

On March 1, 2013, 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, 2014. On March 1, 2013, Mattie purchased a put option giving it the right to sell 200,000 British pounds on March 1, 2014 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, 2013. The following spot exchange rates apply: $\begin{array}{|l|c|}\hline \text { Date } & \text { Spot Rate } \\\hline \text { March 1,2013 } & \$ 1.90 \\\hline \text { December 31,2013 } & \$ 1.89 \\\hline \text { March 1,2014 } & \$ 1.84 \\\hline\end{array}$ Mattie'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 net impact on Mattie's 2013 income as a result of this fair value hedge of a firm commitment?

• A)$1,800.00 decrease.
• B)$1,760.60 decrease.
• C)$2,240.40 decrease.
• D)$1,660.40 increase.
• E)$2,240.60 increase.

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Definitions:

Conduct Disorder

A mental health disorder diagnosed in childhood or adolescence, marked by a persistent pattern of behavioral problems including aggression, property destruction, deceitfulness, or serious rule violations.

Delinquency Issue

Problems or behaviors involving legal violations or actions against societal norms by individuals, typically adolescents.

Antisocial Behaviors

Actions that violate societal norms and the rights of others, often leading to conflict with society or legal issues.

Oppositional Defiant Disorder

A behavior disorder primarily in children characterized by persistent patterns of angry, defiant, and vindictive behavior towards authority figures.