On November 2, 2013, Choi Company Purchased Equipment for 100,000

On November 2, 2013, Choi Company purchased equipment for 100,000 Swiss francs (CHF) with payment requirement on March 30, 2014. To eliminate the risk of foreign exchange losses on this payable, Choi entered into a forward exchange contract on November 3, 2013 to receive CHF 100,000 at a forward rate of CHF1 = $2 on March 30, 2014. The spot rate was CHF1 = $1.95 on November 2, 2013 and CHF1 = $1.97 on December 1, 2013. How should the premium or discount on the forward exchange contract be accounted for if it is deemed to be a cash flow hedge?

A) It should be expensed on the maturity date of the forward exchange contract.
B) It should be expensed on the inception date of the forward exchange contract.
C) It should be expensed over the 5-month term of the forward exchange contract.
D) It should be added to the cost of the machine.