Atherton, Inc., a U.S. company, expects to order goods from a foreign supplier at a price of 100,000 lira, with delivery and payment to be made on April 17. On January 17, Atherton purchased a three-month call option on 100,000 lira and designated this option as a cash flow hedge of a forecasted foreign currency transaction. The following exchange rates apply: Option strike price$4.34 Option cost$5,000 January 17 Spot Rate$4.34 April 17 Spot Rate$4.26 ??What amount will Atherton include as an option expense in net income for the period January 17 to April 17?
A. $4,260.
B. $4,000.
C. $5,260.
D. $5,000.
E. $4,340.
Answer: D
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