Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

I posted this previously and I need it to be all filled in, please help and thank you! On June 1, Maxwell Corporation (a U.S.-based

image text in transcribedimage text in transcribedimage text in transcribedimage text in transcribedimage text in transcribed

I posted this previously and I need it to be all filled in, please help and thank you!

On June 1, Maxwell Corporation (a U.S.-based company) sold goods to a foreign customer at a price of 1,170,000 pesos and will receive payment in three months on September 1. On June 1, Maxwell acquired an option to sell 1,170,000 pesos in three months at a strike price of $0.082. The time value of the option is excluded from the assessment of hedge effectiveness, and the change in time value is recognized in net income over the life of the option. Relevant exchange rates and option premia for the peso are as follows: Date June 1 June 30 September 1 Spot Rate $ 0.082 0.081 0.080 Put Option Premium for September 1 (strike price $0.082) $ 0.0045 0.0032 N/A Maxwell must close its books and prepare its second-quarter financial statements on June 30. a-1. Assuming that Maxwell designates the foreign currency option as a cash flow hedge of a foreign currency receivable, prepare journal entries for the export sale and related hedge in U.S. dollars. a-2. What is the impact on net income over the two accounting periods? b-1. Assuming that Maxwell designates the foreign currency option as a fair value hedge of a foreign currency receivable, prepare journal entries for the export sale and related hedge in U.S. dollars. b-2. What is the impact on net income over the two accounting periods? Assuming that Maxwell designates the foreign currency option as a cash flow hedge of a foreign currency receivable, prepare journal entries for the export sale and related hedge in U.S. dollars. (Do not round intermediate calculations. If no entry is required for a transaction/event, select "No journal entry required in the first account field.) No Date General Journal Debit Credit 1 06/01 Accounts receivable (P) Sales OO 2 06/01 Foreign currency option Cash DO 3 06/30 Foreign exchange gain or loss Accounts receivable (P) Blo 4 06/30 Other comprehensive income Foreign currency option 5 06/30 Other comprehensive income Foreign exchange gain or loss 6 08/30 Foreign exchange gain or loss Other comprehensive income Blo 7 09/01 ON Foreign exchange gain or loss Accounts receivable (P) 8 09/01 Other comprehensive income Foreign currency option 9 09/01 Other comprehensive income Foreign exchange gain or loss OO 10 09/01 Foreign exchange gain or loss Other comprehensive income OOO ON 11 09/01 Foreign currency (P) Accounts receivable (P) 12 09/01 Cash Foreign currency option Foreign currency (P) Bloo Complete this question by entering your answers in the tabs below. Reg A1 Req A2 Req B1 Req B2 What is the impact on net income over the two accounting periods? (Do not round intermediate calculations. Negative amount should be entered with a minus sign.) Impact on net income Assuming that Maxwell designates the foreign currency option as a fair value hedge of a foreign currency receivable, prepare journal entries for the export sale and related hedge in U.S. dollars. (Do not round intermediate calculations. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) No General Journal Debit Credit Date 06/01 1 Accounts receivable (P) Sales 2 06/01 Foreign currency option Cash 3 06/30 Foreign exchange gain or loss Accounts receivable (P) Blo 4 06/30 Foreign exchange gain or loss Foreign currency option a 5 06/30 No journal entry required 6 06/30 No journal entry required 7 09/01 Foreign exchange gain or loss Accounts receivable (P) 8 09/01 Foreign exchange gain or loss Foreign currency option 9 09/01 No journal entry required 10 09/01 No journal entry required 11 09/01 Foreign currency (P) Accounts receivable (P) 12 09/01 Cash Foreign currency option Complete this question by entering your answers in the tabs below. Req A1 Req A2 Req B1 Req B2 What is the impact on net income over the two accounting periods? (Do not round intermediate calculations. Negative amount should be entered with a minus sign.) Impact on net income

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial and Managerial Accounting

Authors: Jonathan E. Duchac, James M. Reeve, Carl S. Warren

11th Edition

9780538480901, 9781111525774, 538480890, 538480904, 1111525773, 978-0538480895

More Books

Students also viewed these Accounting questions