Question: Imp entered into the second forward contract to hedge a commitment to purchase equipment being manufactured to Imps specifications. The expected delivery date is March

Imp entered into the second forward contract to hedge a commitment to purchase equipment being manufactured to Imp’s specifications. The expected delivery date is March 2011 at which time settlement is due to the manufacturer.

The hedge qualifies as a fair value hedge. At December 31, 2010, what amount of foreign currency transaction gain from this forward contract should Imp include in net income?

a. $0

b. $ 3,000

c. $ 5,000

d. $10,000

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