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 130,000 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 130,000 francs in three months at a strike price of $0.96. 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 $0.96)
June 1	$	0.96		$	0.020
June 30		0.90			0.072
September 1		0.85			N/A

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

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

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

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

1 Record the purchase of the foreign currency option. 2 Record entry for receipt of an order to sell merchandise to foreign customer. 3 Record gain or loss on the firm commitment. 4 Record gain or loss on the foreign currency option. 5 Record gain or loss on the firm commitment. 6 Record gain or loss on the foreign currency option. 7 Record the sale. 8 Record the exercise of the foreign currency option. 9 Record entry to close the firm commitment.

Reg A Reg B and C b. What is the impact on net income in each of the two accounting periods? (Negative amounts should be e minus sign.) c. What is the amount of net cash inflow resulting from the sale of goods to the foreign customer? (Do not round intermediate calculations.) Impact on Net Income b. For the second quarter For the third quarter Over the second and third quarters c. Net cash inflow Req A Req B and C Prepare journal entries for the foreign currency option, foreign currency firm commitment, and export sale. transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet Record the purchase of the foreign currency option. Note: Enter debits before credits. General Journal Debit Credit Date 06/01 Record entry Clear entry View general journal