Business, 08.04.2021 18:30 brown62

On May 1, 2020, Mosby Company received an order to sell a machine to a customer in Mexico at a price of 2,000,000 Mexican pesos. The machine was shipped, and payment was received on March 1, 2021. On May 1, 2020, Mosby purchased a put option giving it the right to sell 2,000,000 Mexican pesos on March 1, 2021 for $190,000 (strike price of $0.095 per pesos). Mosby Company properly designates the option as a fair value hedge of the Mexican pesoâs firm commitment. The option cost $3,000 and had a fair value of $3,200 on December 31, 2020. Since the hedge instrument being used is a put option, Keefer has chosen to measure the change in the fair value of the commitment through reference to changes in the spot rate. Mosby's incremental borrowing rate is 12 percent, and the present value factor for two months at a 12 percent annual rate is 0.9803. Required:
What was the impact on Mosby's 2013 net income as a result of this fair value hedge of a firm commitment?

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On May 1, 2020, Mosby Company received an order to sell a machine to a customer in Mexico at a price...

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