On June 1, Maxwell Corporation (a U.S.-based company) sold goods to a foreign customer at a price of 1,200,000 pesos and will receive payment in three months on September 1. On June 1, Maxwell acquired an option to sell 1,200,000 pesos in three months at a strike price of $0.086. 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 June 1 June 30 September 1 Spot Rate $ 0.086 0.085 0.084 Put Option Premium for September 1 (strike price $0.086) $ 0.0049 0.0034 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? Reg A1 Reg A2 Req B1 Req B2 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.) View transaction list X 3 Record the entry to adjust the value of the foreign currency accounts receivable. 12 > 4 Record the change in the fair value of the option. 5 Record the foreign exchange gain or loss on the foreign currency option. 6 Record the change in the time value of the foreign currency option. Credit 7 Record the entry to adjust the value of the foreign currency accounts receivable. 8 Record the change in the fair value of the option. 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.) View transaction list X: 12 > 7 Record the entry to adjust the value of the foreign currency accounts receivable. 8 Record the change in the fair value of the option. 9 Record the foreign exchange gain or loss on the foreign currency option. Credit 10 Record the change in the time value of the foreign currency option. 11 Record receipt of the foreign currency. 12 Record the exercise of the option. Reg A1 Reg A2 Req B1 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.) Impact on net income Reg A1 Reg A2 Req B1 Reg B2 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.) View transaction list X: 3 12 > Record the entry to adjust the value of the foreign currency accounts receivable. 4 Record the change in the fair value of the option. 5 Record the foreign exchange gain or loss on the foreign currency option. 6 Record the change in the time value of the foreign currency option. Credit 7 Record the entry to adjust the value of the foreign currency accounts receivable. 8 Record the change in the fair value of the option. 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.) View transaction list X X 12 > 7 Record the entry to adjust the value of the foreign currency accounts receivable. 8 Record the change in the fair value of the option. 9 Record the foreign exchange gain or loss on the foreign currency option. Credit 10 Record the change in the time value of the foreign currency option. 11 Record receipt of the foreign currency. 12 Record the exercise of the option. Reg A1 Reg A2 Req B1 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.) Impact on net income On June 1, Maxwell Corporation (a U.S.-based company) sold goods to a foreign customer at a price of 1,200,000 pesos and will receive payment in three months on September 1. On June 1, Maxwell acquired an option to sell 1,200,000 pesos in three months at a strike price of $0.086. 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 June 1 June 30 September 1 Spot Rate $ 0.086 0.085 0.084 Put Option Premium for September 1 (strike price $0.086) $ 0.0049 0.0034 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? Reg A1 Reg A2 Req B1 Req B2 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.) View transaction list X 3 Record the entry to adjust the value of the foreign currency accounts receivable. 12 > 4 Record the change in the fair value of the option. 5 Record the foreign exchange gain or loss on the foreign currency option. 6 Record the change in the time value of the foreign currency option. Credit 7 Record the entry to adjust the value of the foreign currency accounts receivable. 8 Record the change in the fair value of the option. 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.) View transaction list X: 12 > 7 Record the entry to adjust the value of the foreign currency accounts receivable. 8 Record the change in the fair value of the option. 9 Record the foreign exchange gain or loss on the foreign currency option. Credit 10 Record the change in the time value of the foreign currency option. 11 Record receipt of the foreign currency. 12 Record the exercise of the option. Reg A1 Reg A2 Req B1 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.) Impact on net income Reg A1 Reg A2 Req B1 Reg B2 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.) View transaction list X: 3 12 > Record the entry to adjust the value of the foreign currency accounts receivable. 4 Record the change in the fair value of the option. 5 Record the foreign exchange gain or loss on the foreign currency option. 6 Record the change in the time value of the foreign currency option. Credit 7 Record the entry to adjust the value of the foreign currency accounts receivable. 8 Record the change in the fair value of the option. 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.) View transaction list X X 12 > 7 Record the entry to adjust the value of the foreign currency accounts receivable. 8 Record the change in the fair value of the option. 9 Record the foreign exchange gain or loss on the foreign currency option. Credit 10 Record the change in the time value of the foreign currency option. 11 Record receipt of the foreign currency. 12 Record the exercise of the option. Reg A1 Reg A2 Req B1 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.) Impact on net income