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

---

Definitions:

Particular Purpose

A specific intent or use for which a product or service is bought, indicating reliance on the seller's advice or expertise.

Implied Warranties

Legal guarantees assumed in transactions, such as the assurance that a product will perform as advertised or is fit for its intended use.

Operation Of Law

Changes in legal status or rights due to the application of law, rather than as a result of an agreement or court order.

Flower Pots

Containers used for planting, growing, and displaying flowers and other plants, made from various materials.