Question
Problem IV: On 7/1/2020, Optical company forecasts the purchase of inventory from a foreign vendor. The cost is estimated to be 550,000 FCU. The inventory
Problem IV: On 7/1/2020, Optical company forecasts the purchase of inventory from a foreign vendor. The cost is estimated to be 550,000 FCU. The inventory will be delivered on 9/15/2020. Also, on 7/1/2020, the company paid $3,000 to purchase a call option to buy 550,000 FCU at a strike price of $0.378 expiring end of September. 1-Jul 31-Jul 31-Aug 15-Sep Spot Rate $0.375 $0.364 $0.396 $0.392 FV of Option $3,000 $2,500 $6,500 Instructions: Prepare the journal entries on the dates listed (The company prepared monthly financial statements): 1. Assuming that on 9/15/2020 the option was exercised and inventory delivered and paid. 2. What if the spot rate on 9/15/2020 was $0.373?
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