Woolsey Corporation, a U.S. company, expects to sell goods to a British customer at a price of
Question:
Woolsey Corporation, a U.S. company, expects to sell goods to a British customer at a price of 250,000 pounds, with delivery and payment to be made on October 24, 2018. On July 24, 2018, Woolsey purchased a three-month put option for 250,000 British pounds and designated this option as a cash flow hedge of a forecasted foreign currency transaction expected to be completed in late October, 2018. The following exchange rates apply:
Option strike price $ 2.17
Option cost $ 4,000
July 24 spot rate $ 2.17
October 24 spot rate $ 2.13
October 24 option premium $0.04
What amount will Woolsey record in AOCI to close it as an adjustment to net income for the period ended October 31?
Multiple Choice
$6,000 debit.
$6,000 credit.
$10,000 debit.
$10,000 credit.
$14,000 debit.
Expert Answer:
Put option gives a right to sale at the strike price agreed in between the pa... View the full answer
Accounting Principles
ISBN: 978-1119048473
7th Canadian Edition Volume 2
Authors: Jerry J. Weygandt, Donald E. Kieso, Paul D. Kimmel, Barbara Trenholm, Valerie Warren, Lori Novak
