Woolsey Corporation, a U What Amount Will Woolsey Include as an Option Expense in a British

Multiple Choice

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: $\begin{array}{|l|l|}\hline \text { Option strike price } & \$ 2.17 \\\hline \text { Option cost } & \$ 4,000 \\\hline \text { July 24 spot rate } & \$ 2.17 \\\hline \text { October 24 spot rate } & \$ 2.13 \\\hline \text { October 24 option premium } & \$ .04 \\\hline\end{array}$ What amount will Woolsey include as an option expense in net income for the period July 24 to October 24?

A) $4,000.
B) $5,000.
C) $10,000.
D) $12,000.
E) $14,000.