On October 1, 2011, Eagle Company Forecasts the Purchase of Inventory

question 85

Multiple Choice

On October 1, 2011, Eagle Company forecasts the purchase of inventory from a British supplier on February 1, 2012, at a price of 100,000 British pounds. On October 1, 2011, Eagle pays $1,800 for a three-month call option on 100,000 pounds with a strike price of $2.00 per pound. The option is considered to be a cash flow hedge of a forecasted foreign currency transaction. On December 31, 2011, the option has a fair value of $1,600. The following spot exchange rates apply: $$\begin{array} { | l | c | } \hline \text { Date } & \text { Spot Rate } \\\hline \text { October 1, 2011 } & \$ 2.00 \\\hline \text { December 31, 2011 } & \$ 1.97 \\\hline \text { February 1,2012 } & \$ 2.01 \\\hline\end{array}$$
-What is the 2012 effect on net income as a result of these transactions?

• A) $195,000
• B) $201,600
• C) $201,000
• D) $202,600
• E) $203,000

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Definitions:

Gender Socialization

The process through which individuals learn the gender roles expected by society.

Traditional Expectations

The established norms and roles that individuals are anticipated to conform to by virtue of their cultural, social, or family positioning.

Minangkabau Society

A matrilineal society in West Sumatra, Indonesia, characterized by female inheritance and property rights.

Matriarchal

A social system or family structure where the female, especially the mother, has the central role of authority and decision-making.