In June, Mu Corporation, a U.S. manufacturer of specialty confectionery products, submits a bid to supply a prestigious retail merchandiser with boxed chocolates for the traditional Valentine’s Day. At the time the spot rate for francs was $0.89 = CHF1. If it secures the contract, it will sign a contract with a large Swiss chocolate manufacturer to buy the necessary raw material. The outcome of the bidding will not be known for two months and the treasurer of Mu Corporation is concerned that the franc may rise in value during the interim, thus reducing (or possibly even eliminating) its planned profit on the fixed-price bid. To protect his company against an appreciation of the franc, the treasurer buys 25 CHF September 30 option calls at 1.80 (i.e., a premium of 1.8 cents per franc) on a standard contract amount of CHF 62,500. His prediction proves accurate as the franc rises in value to 91.6 cents by the end of August. Rather than await the outcome of the bid, Mu Corporation exercises its call options at the end of August.

Required:
Provide the necessary journal entries to record the acquisition and exercise of the options.