On June $1,$ Parker$-$Mae Corporation $($a U$.$S$.-$based company$)$ received an order to sell goods to a foreign customer at a price of $155,000$ francs. Parker$-$Mae will ship the goods and receive payment in three months, on September $1.$ On June $1,$ Parker$-$Mae purchased an option to sell $155,000$ francs in three months at a strike price of $$1\mathrm{.}14.$ The company designated the option as a fair value hedge of a foreign currency firm commitment. The option's time value is excluded in assessing hedge effectiveness, and the change in time value is recognized in net income. The fair value of the firm commitment is measured by referring to changes in the spot rate $($discounting to present value is ignored$).$ Relevant exchange rates and option premiums for the franc are as follows:

Date Spot Rate Put Option Premium for September $1($strike price $$1\mathrm{.}14)$

June $1$ $ $1\mathrm{.}14$ $ $0\mathrm{.}020$

June $301\mathrm{.}080\mathrm{.}072$

September $10\mathrm{.}98$ N$/$A

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

Required:

Prepare journal entries for the foreign currency option, foreign currency firm commitment, and export sale.

What is the impact on net income in each of the two accounting periods?

What is the amount of net cash inflow resulting from the sale of goods to the foreign customer?On June $1,$ Parker$-$Mae Corporation $($a U$.$S$.-$based company$)$ received an order to sell goods to a foreign customer at a price of $155,000$

francs. Parker$-$Mae will ship the goods and receive payment in three months, on September $1.$ On June $1,$ Parker$-$Mae purchased an

option to sell $155,000$ francs in three months at a strike price of $$1\mathrm{.}14.$ The company designated the option as a fair value hedge of a

foreign currency firm commitment. The option's time value is excluded in assessing hedge effectiveness, and the change in time value

is recognized in net income. The fair value of the firm commitment is measured by referring to changes in the spot rate $($discounting to

present value is ignored$).$ Relevant exchange rates and option premiums for the franc are as follows:

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

Required:

a$.$ Prepare journal entries for the foreign currency option, foreign currency firm commitment, and export sale.

b$.$ What is the impact on net income in each of the two accounting periods?

c$.$ What is the amount of net cash inflow resulting from the sale of goods to the foreign customer?

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

Prepare journal entries for the foreign currency option, foreign currency firm commitment, and export sale.

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.View transaction list

View journal entry worksheet

$\backslash$table$[[,$No$,$Date,General Journal,Debit,Credit$],[>,1,\frac{06}{01},$Foreign Currency Option,,$],[,,$Cash,,$],[,2,\frac{06}{01},$No Journal Entry Required,,$],[>,3,\frac{06}{30},$Foreign Exchange Gain or Loss,,$],[,,$Firm Commitment,,$],[,4,\frac{06}{30},$Foreign Currency Option,,$],[,,$Foreign Exchange Gain or Loss,,$],[,5,09/01,$Foreign Exchange Gain or Loss,,$],[,,$Firm Commitment,,$],[,6,09/01,$Foreign Currency Option,,$],[,,$Foreign Exchange Gain or Loss,,$],[/,7,09/01,$Foreign Currency $($francs$),,],[,,$Sales,,$],[/,8,09/01,$Cash,,$],[,,$Foreign Currency $($francs$),,],[,,$Foreign Currency Option,,$],[$l$,9,09/01,$Firm Commitment,,$],[,,$Sales,,$]]$