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

question 36

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 2014 income as a result of this 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.

---

Definitions:

Self-Awareness

The conscious knowledge of one’s own character, feelings, motives, and desires, being aware of oneself as an individual.

Influences Other People

The capacity or ability to affect others' thoughts, actions, or decisions through various means, such as persuasion, example, or authority.

Social Needs

Fundamental human requirements for interaction and belonging within a community or society.

Emotional Support

Assistance provided through empathy, care, and concern, helping individuals cope with emotional distress and fostering emotional well-being.