Business
Business, 06.05.2020 06:27, kyleescott9525

On June 1, Alexander Corporation sold goods to a foreign customer at a price of 1,050,000 pesos and will receive payment in three months on September 1. On June 1, Alexander acquired an option to sell 1,050,000 pesos in three months at a strike price of $0.063. Relevant exchange rates and option premiums for the peso are as follows: Date Spot Rate Put Option Premium for September 1 (strike price $0.063) June 1 $ 0.063 $ 0.0028 June 30 0.068 0.0022 September 1 0.062 N/A Alexander must close its books and prepare its second-quarter financial statements on June 30. For ACCN7120: please ignore requirements a-1 and a-2 and solve only requirements b1 and b-2. The fair values of the option contract are in the course website under Module 7.

a-1. Assuming that Alexander designates the foreign currency option as a cash flow hedge of a foreign currency receivable, prepare journal entries for these transactions in U. S. dollars.
a-2. What is the impact on net income over the two accounting periods?

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On June 1, Alexander Corporation sold goods to a foreign customer at a price of 1,050,000 pesos and...

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