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On December 1, 2018, Keenan Company, a U.S. firm, sold merchandise to Velez Company of Canada...

On December 1, 2018, Keenan Company, a U.S. firm, sold merchandise to Velez Company of Canada for 400,000 Canadian dollars (CAD). Collection of the receivable is due on February 1, 2019. Keenan purchased a foreign currency put option with a strike price of $.94 (U.S.) on December 1, 2018. This foreign currency option is designated as a cash flow hedge. Relevant exchange rates follow:

Date Spot Rate Option Premium
12/1/2018 $0.94 $0.06
12/31/2018 $0.95 $0.04
2/1/2019 $0.90
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