Amaretta Company (a U.S.-based company ordered merchandise from a foreign supplier on November 20 at a price of 1,140,000 rupees when the spot rate was $0.050 per rupee. Delivery and payment were scheduled for December 20. On November 20, Amaretta acquired a call option on 1,140,000 rupees at a strike price of $0.050, paying a premium of $0.001 per rupee. The company designates the option as a fair value hedge of a foreign currency firm commitment. The fair value of the firm commitment is measured by referring to changes in the spot rate. The option's time value is excluded from the assessment of hedge effectiveness, and the change in time value is recognized in net income. The merchandise arrives, and Amaretta makes payment according to schedule. Amaretta sells the merchandise by December 31, when it closes its books. a. Assuming a spot rate of $0.053 per rupee on December 20. prepare all journal entries to account for the foreign currency option, foreign currency firm commitment, and purchase of inventory. b. Assuming a spot rate of $0.048 per rupee on December 20, prepare all journal entries to account for the foreign currency option, foreign currency firm commitment, and purchase of inventory. Required A Reglured B Assuming a spot rate of $0.053 per rupee on December 20, prepare all journal entries to account for the foreign currency option, forelgn currency firm commitment, and purchase of Inventory. (If no entry is required for a transaction/event, select "No journal entry required" In the first account field.) No Date Credit Debit 7.000 1 General Journal Foreign currency option Cash 11/20 Olo 7.000 2 11/20 No journal entry required 3 12/20 Foreign exchange gain or loss Firm commitment olol 4 12/20 Foreign currency option Foreign exchange gain or loss lolo 5 12/20 Foreign currency (rupees) Cash Foreign currency option ololol 6 12/20 Merchandise Inventory Foreign currency (rupees) O 7 12/31 Cost of goods sold Merchandise Inventory 0 8 12/31 Firm commitment Cost of goods sold Required A Reglured B Assuming a spot rate of $0.048 per rupee on December 20, prepare all journal entries to account for the foreign currency option, forelgn currency firm commitment, and purchase of Inventory. (If no entry is required for a transaction/event, select "No journal entry required In the first account field.) View transaction list X 10 3 1 Record the purchase of the foreign currency option. 2 Record entry for order placed with foreign supplier. Record the firm commitment at its fair value. 4 Record gain or loss on the foreign currency option. Record the entry to recognize the change in the time value of the foreign currency option. Record entry for foreign currency acquired at spot rate. 7 Record receipt of goods and payment in rupees. 5 Credit Note : = journal entry has been entered Record antry Clear entry View general journal Required A Reglured B Assuming a spot rate of $0.048 per rupee on December 20, prepare all journal entries to account for the foreign currency option, forelgn currency firm commitment, and purchase of Inventory. (If no entry is required for a transaction/event, select "No journal entry required In the first account field.) View transaction list X 4 Record gain or loss on the foreign currency option. 10 5 Record the entry to recognize the change in the time value of the foreign currency option. Credit o Record entry for foreign currency acquired at spot rate. 7 Record receipt of goods and payment in rupees. & Record the entry to transfer the carrying value of Inventory to cost of goods sold. 9 Record entry to close the firm commitment. 10 Record the entry to close the firm commitment account. = journal entry has been entered Note : Record antry Clear entry View general journal