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. on july 24, 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. the following exchange rates apply:
option strike price = $2.17
option cost : $4,000
july 24th spot rate : $2.17
october 24th spot rate : $2.13
october 24th option premium : $.04
what amount will woolsey include as adjustment to net income for the period ended october 31?
a. $6,000 positive.
b. $6,000 negative.
c. $10,000 positive.
d. $10,000 negative.
e. $14,000 positive.
Answers: 2
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