On June 1, Alexander Corporation 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, Alexander acquired an option to sell 1,170,000 pesos in three months at a strike price of $0.063. Relevant exchange rates and option premiums for the peso are as follows:
Put Option Premium for September 1 (strike price $0.063) $ 0.0024 0.0017 Spot Rate Date June 1 June 30 September 1 $ 0.063 0.066 0.062 N/A Alexander must close its books and prepare its second-quarter financial statements on June 30 a-1. Assuming that Alexander designates the foreign currency option as a cash flow hedge of a foreign currency receivable, prepare journal entries for these transactions in U.S. dollars a-2. What is the impact on net income over the two accounting periods? b-1. Assuming that Alexander designates the foreign currency option as a fair value hedge of a foreign currency receivable, prepare journal entries for these transactions in U.S. dollars b-2. What is the impact on net income over the two accounting periods? Complete this question by entering your answers in the tabs below Req A1 Req A2 Req B1 Req B2 Assuming that Alexander designates the foreign currency option as a cash flow hedge of a foreign currency receivable prepare journal entries for these transactions 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.) Put Option Premium for September 1 (strike price $0.063) $ 0.0024 0.0017 Spot Rate Date June 1 June 30 September 1 $ 0.063 0.066 0.062 N/A Alexander must close its books and prepare its second-quarter financial statements on June 30 a-1. Assuming that Alexander designates the foreign currency option as a cash flow hedge of a foreign currency receivable, prepare journal entries for these transactions in U.S. dollars a-2. What is the impact on net income over the two accounting periods? b-1. Assuming that Alexander designates the foreign currency option as a fair value hedge of a foreign currency receivable, prepare journal entries for these transactions in U.S. dollars b-2. What is the impact on net income over the two accounting periods? Complete this question by entering your answers in the tabs below Req A1 Req A2 Req B1 Req B2 Assuming that Alexander designates the foreign currency option as a cash flow hedge of a foreign currency receivable prepare journal entries for these transactions 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.)
