On May $1,2024,$ Mosby Company received an order to sell a machine to a customer in Canada at a price of $2,000,000$ Mexican pesos. The machine was shipped, and payment was received on March $1,2025.$ On May $1,2024,$ Mosby purchased a put option giving it the right to sell $2,000,000$ pesos on March $1,2025,$ at a price of $$190,000.$ Mosby properly designates the option as a fair value hedge of the peso firm commitment. The option cost $$3,000$ and had a fair value of $$3,200$ on December $31,2024.$ The following spot exchange rates apply:

DateSpot RateMay $1,2024$$ $0\mathrm{.}095$December $31,2024$$ $0\mathrm{.}094$March $1,2025$$ $0\mathrm{.}089$

What was the impact on Mosby's $2024$ net income as a result of this fair value hedge of a firm commitment?

DateSpot RateOption PremiumDecember $1,2024$$ $0\mathrm{.}97$$ $0\mathrm{.}05$December $31,2024$$ $0\mathrm{.}95$$ $0\mathrm{.}04$February $1,2025$$ $0\mathrm{.}94$$ $0\mathrm{.}03$

Compute the fair value of the foreign currency option at December $31,2024.$

Multiple Choice

$$7,500$

$$6,000$

$$3,000$

$$4,500$

$$1,500$

DateSpot RateOption PremiumDecember $1,2024$$ $0\mathrm{.}97$$ $0\mathrm{.}05$December $31,2024$$ $0\mathrm{.}95$$ $0\mathrm{.}04$February $1,2025$$ $0\mathrm{.}94$$ $0\mathrm{.}03$

Compute the fair value of the foreign currency option at December $31,2024.$

Multiple Choice

$$7,500$

$$6,000$

$$3,000$

$$4,500$

$$1,500$

On December $1,2024,$ Keenan Company, a U$.$S$.$ firm, sold merchandise to Velez Company of Canada for $150,000$ Canadian dollars $($CAD$).$ Collection of the receivable is due on February $1,2025.$ Keenan purchased a foreign currency put option with a strike price of $$0\mathrm{.}97($U$.$S$.)$ on December $1,2024.$ This foreign currency option is designated as a cash flow hedge. Relevant exchange rates follow:

DateSpot RateOption PremiumDecember $1,2024$$ $0\mathrm{.}97$$ $0\mathrm{.}05$December $31,2024$$ $0\mathrm{.}95$$ $0\mathrm{.}04$February $1,2025$$ $0\mathrm{.}94$$ $0\mathrm{.}03$

Compute the fair value of the foreign currency option at December $31,2024.$

Multiple Choice

$$7,500$

$$6,000$

$$3,000$

$$4,500$

$$1,500$

On December $1,2024,$ Keenan Company, a U$.$S$.$ firm, sold merchandise to Velez Company of Canada for $150,000$ Canadian dollars $($CAD$).$ Collection of the receivable is due on February $1,2025.$ Keenan purchased a foreign currency put option with a strike price of $$0\mathrm{.}97($U$.$S$.)$ on December $1,2024.$ This foreign currency option is designated as a cash flow hedge. Relevant exchange rates follow:

DateSpot RateOption PremiumDecember $1,2024$$ $0\mathrm{.}97$$ $0\mathrm{.}05$December $31,2024$$ $0\mathrm{.}95$$ $0\mathrm{.}04$February $1,2025$$ $0\mathrm{.}94$$ $0\mathrm{.}03$

Compute the fair value of the foreign currency option at December $31,2024.$

Multiple Choice

$$7,500$

$$6,000$

$$3,000$

$$4,500$

$$1,500$