On June 1, Maxwell Corporation (a U.S.-based company) sold goods to a foreign customer at a price of 1,310,000 pesos and will receive payment in three months on September 1. On June 1, Maxwell acquired an option to sell 1,310,000 pesos in three months at a strike price of $0.096. 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 $0.096)
June 1	$	0.096		$	0.0059
June 30		0.095			0.0039
September 1		0.094			N/A

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

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.

Req A1-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. (Do not round intermediate calculations. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Req A2-What is the impact on net income over the two accounting periods? (Do not round intermediate calculations. Negative amount should be entered with a minus sign.)

Req B1-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. (Do not round intermediate calculations. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Req B2-What is the impact on net income over the two accounting periods? (Do not round intermediate calculations. Negative amount should be entered with a minus sign.)