Marchetti Company, a U.S.-based importer of wines and spirits, placed an order with a French supplier for 1,000 cases of wine at a price of 200 euros per case. The total purchase price is 200,000 euros. Relevant exchange rates for the euro are as follows:

Call Option Premium

for Oct. 31, 2021

Date Spot Rate (strike price $1.00)

September 15, 2021 $1.00 $0.035

September 30, 2021 $1.05 $0.070

October 31, 2021 $1.10 N/A

Marchetti Company has an incremental borrowing rate of 12 percent (1 percent per month). The present value factor for one month is 0.9901. The firm closes the books and prepares financial statements on September 30.

The wine arrived on September 15, 2021, and the company made payment on October 31, 2021. On September 15, Marchetti purchased a 45-day call option for 200,000 euros. It properly designated the option as a fair value hedge of a foreign currency payable.

Prepare journal entries to account for the transactions.

What is the net benefit of acquiring the option than leaving the transaction unhedged?