On March 1, 20X2, McBride Ltd -Assume That the Transaction Qualifies as a Cash-Flow Hedge

Multiple Choice

On March 1, 20X2, McBride Ltd. issued a purchase order to Tao Heavy Machines (Singapore) Inc. to acquire a drilling machine for $400,000 SGD. On the same day, McBride entered into a forward contract to receive $400,000 SGD on July 31, 20X2. The machine was delivered on June 1, 20X2, and payment was made July 31, 20X2. McBride has an April 30 year-end. The following information has been provided: $\begin{array}{|l|c|c|}\hline \text { Date } & \text { Spot Rate } & \text { Forward rate to July } 31,20 \times 2 \\\hline \text { March } 1,20 \times 2 & .7686 & .7810 \\\hline \text { April } 30,20 \times 2 & .7702 & .7818 \\\hline \text { June } 1,20 \times 2 & .7940 & .7985 \\\hline \text { July } 31,20 \times 2 & .7995 & \text { n/a }\\\hline \end{array}$

-Assume that the transaction qualifies as a cash-flow hedge. What is the cost of the hedge?

A) $ 1,800
B) $ 2,200
C) $ 4,960
D) $12,360