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

Multiple Choice

On 6/1/17, an American firm purchased an 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 entered into a forward contract to purchase 100,000 Canadian dollars for delivery on 8/1/17.The exchange rates were as follows: ?

$$\begin{array} { l r r r } & \text { Spot } & \text { Forward } \\\hline 6 / 1 / 17 & 1 \mathrm { CD } = \$ 0.73 & 1 \mathrm { CD } = \$ 0.74 \\6 / 30 / 17 & 1 \mathrm { CD } = \$ 0.75 & 1 \mathrm { CD } = \$ 0.76 \\8 / 1 / 17 & 1 \mathrm { CD } = \$ 0.78 & 1 \mathrm { CD } = \$ 0.78\end{array}$$
The American firm's fiscal year end is 6/30/17.The changes in the value of the forward contract should be discounted at 8%.The transaction qualifies as for accounting as a cash flow hedge.What is the total amount that will be recognized in other comprehensive income in the year ended 6/30/17?

A) $1,987 debit
B) $2,320 credit
C) $320 credit
D) $2,000 debit