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Question: Monument Company (a U.S.-based company)

Monument Company (a U.S.-based company) ordered a machine costing €100,000 from a foreign supplier on January 15, when the spot rate was $1.20 per €. A one-month forward contract was signed on that date to purchase €100,000 at a forward rate of $1.23. The forward contract is properly designated as a fair value hedge of the €100,000 firm commitment. On February 15, when the company receives the machine, the spot rate is $1.22. At what amount should Monument Company capitalize the machine on its books?
a. $120,000
b. $121,000
c. $122,000
d. $123,000


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