Given its experience, Gamier Corporation expects that it will sell goods to a foreign customer at a price of 1 million lire on March 15, Year 2. To hedge this forecasted transaction, a three-month put option to sell 1 million lire is acquired on December 15, Year 1. Gamier selects a strike price of $0.15 per lire, paying a premium of $0,005 per unit, when the spot rate is $0.15. The spot rate decreases to $0.14 at December 31, Year 1, causing the fair value of the option to increase to $12,000. By March 15, Year 2, when the goods are delivered and payment is received from the customer, the spot rate has fallen to $0.13, resulting in a fair value for the option of $20,000.
Required:
Prepare all journal entries for the option hedge of a forecasted transaction and for the export sale, assuming that December 31 is Gamier Corporation's year-end. What is the overall impact on net income over the two accounting periods? What is the net cash inflow from this export sale?