A US Company Uses Forward Contracts to Hedge Its Euro-Denominated Purchases

Multiple Choice

A U.S. company uses forward contracts to hedge its euro-denominated purchases of merchandise imported from an Irish supplier. Assume the spot rate is $1.26/€ and the appropriate forward rate is $1.25 when the merchandise is delivered, and the company enters the forward contract. The spot rate is $1.23 when the forward contract comes due and the company pays the supplier.
Which statement is true?

A) The loss on the forward and the gain on the payable to the supplier appear on the company's income statement, with a net negative impact on income.
B) The gain on the forward and the loss on the payable to the supplier are matched in the company's OCI, with a net negative impact on OCI.
C) The loss on the forward and the gain on the payable to the supplier are matched in the company's OCI, with a net positive impact on income.
D) The loss on the forward and the gain on the payable to the supplier appear on the company's income statement, with a net positive impact on income.