Problem $1($total $100$ points$)$

Panthers Corp., a U$.$S$.$ importer of wine, placed an order with an Italian wine producer for $1,000,000$ bottles, at a price of Euro $15$ per bottle. Relevant exchange rates are:

Panthers has an incremental borrowing rate of $12$ percent $(1$ percent per month$)$ and prepares the financial statements on December $31.$

Required:

a$)$ The wine was received on November $1,2021,$ and payment was made on January $31,2022.$ On November $1,$ Panthers purchased a three$-$month call option for Euro $15$ million. The call option contract was properly designated as a cash flow hedge of a foreign currency payable. Prepare the journal entries to account for the import purchase and foreign currency option. $(20$ points$)$

b$)$ The wine was ordered on November $1,2021.$ It was received and paid for on January $31,2022.$ On November $1,$ Panthers purchased a three$-$month call option for Euro $15$ million. The option was properly designated as a fair value hedge of a foreign currency firm commitment. The fair value of the firm commitment is measured through reference'to changes in the spot rate. Prepare the journal entries to account for the foreign currency option, firm commitment, and import purchase. $(20$ points$)$Assignment $4$

Related Material: Chapter $6$ of the textbook

Problem $1($total $100$ points$)$

Panthers Corp., a U$.$S$.$ importer of wine, placed an order

with an Italian wine producer for $1,000,000$ bottles, at a

price of Euro $15$ per bottle. Relevant exchange rates are:

Panthers has an incremental borrowing rate of $12$ percent

$(1$ percent per month$)$ and prepares the financial

statements on December $31.$

Required:

a$)$ The wine was received on November $1,2021,$ and

payment was made on January $31,2022.$ On

November $1,$ Panthers purchased a three$-$month call

option for Euro $15$ million. The call option contract

was properly designated as a cash flow hedge of a

foreign currency payable. Prepare the journal entries

to account for the import purchase and foreign

currency option. $(20$ points$)$

b$)$ The wine was ordered on November $1,2021.$ It was

received and paid for on January $31,2022.$ On

November $1,$ Panthers purchased a three$-$month call

option for Euro $15$ million. The option was properly

designated as a fair value hedge of a foreign currency

firm commitment. The fair value of the firm

commitment is measured through reference to

changes in the spot rate. Prepare the journal entries

to account for the foreign currency option, firm

commitment, and import purchase. $(20$ points$)$