Shandra Corporation $($a U$.$S$.-$based company$)$ expects to order goods from a foreign supplier at a price of $115,000$ pounds, with delivery and payment to be made on June $15.$ On April $15,$ when the spot rate is $$1\mathrm{.}45$ per pound, Shandra purchases a two$-$month call option on $115,000$ pounds and designates this option as a cash flow hedge of a forecasted foreign currency transaction. The time value of the option is excluded in assessing hedge effectiveness; the change in time value is recognized in net income over the life of the option. The option has a strike price of $$1\mathrm{.}45$ per pound and costs $$1,150.$ The goods are received and paid for on June $15.$ Shandra sells the imported goods in the local market immediately. The spot rate for pounds is $$1\mathrm{.}500$ on June $15.$

Required:

a$-1.$ Prepare all journal entries for Shandra Corporation related to this transaction and hedge.

$1.$ Record the purchase of a foreign currency option.

$2.$ Record an entry to adjust the fair value of the option and recognize the change in fair value when the spot rate for pounds is $$1\mathrm{.}5.$

$3.$ Record the $$1,150$ cost of goods sold.

$4.$ Record the exercise of the foreign currency option $$ receipt of $115,000$ pounds.

$5.$Record the purchase of inventory and payment of $115,000$ pounds.

$6.$ Record COGS when inventory is sold.

$7.$ Record the closure of Accumulated Other Comprehensive Income $($AOCI$).$

a$-2.$ What amount should Shandra Corporation report in net income as cost of goods sold for the quarter ending June $30?$

b$.$ What amount should Shandra Corporation report in net income as foreign exchange gain or loss for the quarter ending June $30?$