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 include as an option expense in net income for the period July 24 to October 24?
A. $10,000.
B. $5,000.
C. $14,000.
D. $12,000.
E. $4,000.
Answer: E
Business
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