Primo Inc, a U

question 8

Multiple Choice

Primo Inc., a U.S. company, ordered parts costing 100,000 rupee from a foreign supplier on July 7 when the spot rate was $.025 per rupee. A one-month forward contract was signed on that date to purchase 100,000 rupee at a rate of $.027. The forward contract is properly designated as a fair value hedge of the 100,000 rupee firm commitment. On August 7, when the parts are received, the spot rate is $.028. At what amount should the parts inventory be carried on Primo's books?

• A) $2,000.
• B) $2,100.
• C) $2,500.
• D) $2,700.
• E) $2,800.

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