On May 1, 2013, Mosby Company received an order to sell a machine to a customer in Canada at a price of 2,000,000 Mexican Pesos. The machine was shipped and payment was received on March 1, 2014. On May 1, 2013, Mosby purchased a put option giving it the right to sell 2,000,000 pesos on March 1, 2014. Mosby properly designates the option as a Fair Value Hedge of the peso firm commitment. The following spot rate and option price exchange rates apply:

Date	Spot Rate	Option Price
5/1/2013	$0.095	$0.0015
12/31/2013	$0.094	$0.0016
3/1/2014	$0.089

Mosby's incremental borrowing rate is 12%, and the present value factor for two months at 12% annual rate is .9803.

A) Prepare the journal entries for the foreign currency option and firm commitment.

B) What is the impact of net income over the two accounting periods?