On June 1, Maxwell Corporation (a U.S.-based company) sold goods to a foreign customer at a price of 1,190,000 pesos and will receive payment in three months on September 1. On June 1, Maxwell acquired an option to sell 1,190,000 pesos in three months at a strike price of $0.084. 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 $0.084) June 1 $ 0.084 $ 0.0047 June 30 0.083 0.0033 September 1 0.082 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?

A1

1Record the sale of goods.

2Record the purchase of the foreign currency option.

3Record the entry to adjust the value of the foreign currency accounts receivable.

4Record the change in the fair value of the option.

5Record the foreign exchange gain or loss on the foreign currency option.

6Record the change in the time value of the foreign currency option.

7Record the entry to adjust the value of the foreign currency accounts receivable.

8Record the change in the fair value of the option.

9Record the foreign exchange gain or loss on the foreign currency option.

10Record the change in the time value of the foreign currency option.

11Record receipt of the foreign currency.

12Record the exercise of the option.

same process for B1 and B2, please answer ASAP, thanks!