Palmer Corporation, operating as a US. corporation, expects to order goods from a foreign supplier at a price of 200,000 pounds, with delivery and payment to be made on April 15. On January 15, Palmer purchased a three-month call option on 200,000 pounds and designated this option as a cash flow hedge of a forecasted foreign currency transaction. The option has a strike price of $0.25 per pound and costs $2,000. The spot rate for pounds is $0.25 on January 15 and $0.22 on April 15. What amount will Palmer Corporation report as an option expense in net income during the period January 15 to April 15?

a. $600.

b. $1,000.

c. $2,000.

d. $4.400.

Answer rating: 100% (QA)

P Corporation a US company imported goods worth 200000 pounds on 15th January and purchased a ... View the full answer