On June 1, Alexander Corporation sold goods to a foreign customer at a price of 1,100,000 pesos and will receive payment in three months on September 1. On June 1, Alexander acquired an option to sell 1,100,000 pesos in three months at a strike price of $0.073. Relevant exchange rates and option premiums for the peso are as follows: Date June 1 June 30 September 1 Spot Rate $0.073 0.079 0.071 Put Option Premium for September 1 (strike price $0.073) $ 0.0026 0.0021 N/A Alexander must close its books and prepare its second-quarter financial statements on June 30. the impact o incon accountang penious: b-1. Assuming that Alexander designates the foreign currency option as a fair value hedge of a foreign currency receivable, prepare journal entries for these transactions in U.S. dollars. b-2. What is the impact on net income over the two accounting periods?

On June 1, Alexander Corporation sold goods to a foreign customer at a price of 1,100,000 pesos and will receive payment in three months on September 1. On June 1, Alexander acquired an option to sell 1,100,000 pesos in three months at a strike price of $0.073. Relevant exchange rates and option premiums for the peso are as follows: Date June 1 June 30 September 1 Spot Rate $0.073 0.079 0.071 Put Option Premium for September 1 (strike price $0.073) $ 0.0026 0.0021 N/A Alexander must close its books and prepare its second-quarter financial statements on June 30. the impact o incon accountang penious: b-1. Assuming that Alexander designates the foreign currency option as a fair value hedge of a foreign currency receivable, prepare journal entries for these transactions in U.S. dollars. b-2. What is the impact on net income over the two accounting periods?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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