On December 1, 2001 Pimlico Made Sales to a Customer

question 2

Multiple Choice

On December 1, 2001 Pimlico made sales to a customer in India and recorded Accounts Receivable of 10,000,000 rupees. The customer has until March 1, 2002 to pay. On December 1, 2001, Pimlico paid $500 for a put option to sell rupees at a strike price of $2.30 per 100 rupees on March 1, 2002, which was the spot rate on December 1, 2001. On December 31, 2001, the spot rate was $2.80 per 100 rupees and the option premium was $0.004 per 100 rupees. If the spot rate on March 1, 2002 was $2.45 per 100 rupees, what is the foreign currency exchange gain or loss that should be recorded that day?

• A) $15,000 gain
• B) $15,000 loss
• C) $35,000 gain
• D) $35,000 loss

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Definitions:

Leasehold

An interest or estate in real property granting possession to the lessee (or tenant) for a certain predefined period, under a lease agreement.

Bailment

Bailment is a legal relationship in which physical possession of personal property is transferred from one party to another, with the understanding that the property will be returned.

Possessory

Related to or concerned with the possession of property or assets, often within legal contexts.

Legally Restrict

To impose legal limits on actions or rights, typically through laws or regulations.