On 6/1/17, an American Firm Purchased Inventory Costing 100,000 Canadian

Multiple Choice

On 6/1/17, an American firm purchased inventory costing 100,000 Canadian Dollars from a Canadian firm to be paid for on 8/1/17.Also on 6/1/17, the American firm acquired an option for $1,500 to purchase 100,000 Canadian dollars for delivery on 8/1/17.The strike price for the option was $0.685.The exchange rates were as follows: ?

$$\begin{array} { l r r } & \text { Spot } & \text { Option value } \\\hline 6 / 1 / 17 & 1 \mathrm { CD } = \$ 0.68 & \$ 1,500 \\6 / 30 / 17 & 1 \mathrm { CD } = \$ 0.70 & \$ 2,500 \\8 / 1 / 17 & 1 \mathrm { CD } = \$ 0.73 & \$ 4,500\end{array}$$ The entry to settle the option will include:

A) a credit to Investment in Option of $1,500
B) a debit to Foreign Currency of $73,000
C) a credit to cash of $73,000
D) a credit to Investment in Option of $2,000