On 1 March 2017 Cron Ltd entered a transaction with the American Eagles Inc (a United States firm) for the sale USD500,000 of scrummaging machines. The equipment is to be air freighted on 2 May 2017 and payment is due on 1 August 2017.

Cron Ltd is concerned about exchange rate fluctuations and on 1 March purchases an option to sell USD500,000 at an exchange rate 0.7500 for delivery on 1 August 2017. Cron Ltd pays $15,500 for the option at this time. On 2 May 2017 the option is worth $1,500 and on 30 June 2017 the value of the option is $20,500.

The exchange rates over this period are:

1 March 2017	AUD1.00 = USD0.7600
2 May 2017	AUD1.00 = USD0.7400
30 June 2017	AUD1.00 = USD0.7700
1 August 2017	AUD1.00 = USD0.8000

Required

1. Prepare journal entries for Cron Ltd that are required by AASB 121 Foreign Currencies and AASB 132 / 139 Financial Instruments to record the above transactions, including the adjustments at year end (30 June 2017). Cron Ltd does not designate the option as a hedge.

THIS IS THE ANSWER BUT I HAVE A QUESTION ABOUT IT:

1 March 2017
Option	15,500
Cash		15,500
2 May 2017
Accounts Receivable	675,675
Revenue		675,675
30 June 2017
Fx Loss	26,325
Accounts Receivable		26,325
Option	5,000
Gain FX		5,000
1 August 2017
Fx Loss	24351
Accounts Receivable		24351
Cash	41,666
Option FX		20,500
Profit and Loss		21,166
Cash	625,000
Accounts Receivable		625,000

I UNDERSTAND THE QUESTION UP UNTIL THIS PART. WHERE DID THEY GET the cash value of 41666 from and the profit and loss number of 21666

Cash	41,666
Option FX		20,500
Profit and Loss		21,166