On June 1, CaseW Corporation made a sale to a foreign customer for 1,070,000 pesos. The foreign customer will make payment in three months on September 1. On June 1, CaseW purchased an option to sell 1,070,000 pesos in three months at a strike price of $0.070. 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	Spot Rate			Put Option Premium for September 1 (strike price $0.070)
June 1	$	0.070		$	0.0033
June 30		0.069			0.0026
September 1		0.068			N/A

CaseW must close its books on June 30 to prepare interim financial statements.

1. a-1. Assuming that CaseW 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.

2. a-2. What is the impact on net income over the two accounting periods?

3. b-1. Assuming that CaseW 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.

4. b-2. What is the impact on net income over the two accounting periods?