On June $1,$ Maxwell Corporation $($a U$.$S$.-$based company$)$ sold goods to a foreign customer at a price of $1,400,000$ pesos and will

receive payment in three months on September $1.$ On June $1,$ Maxwell acquired an option to sell $1,400,000$ pesos in three months at a

strike price of $$0\mathrm{.}102.$ 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:

Maxwell must close its books and prepare its second$-$quarter financial statements on June $30.$

Required:

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?

Complete this question by entering your answers in the tabs below.

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.

Note: Do not round intermediate calculations. If no entry is required for a transaction$/$event$,$ select $"$No Journal Entry Required" in the

first account field.

Journal entry worksheet

Record the sale of goods.

Note: Enter debits before credits.