On March 1, 2014, Amber Company sold goods to a foreign customer at a price of 50,000 foreign currency units. The customer will pay in three months. At the time of the sale, Amber paid $2,000 to acquire an option to sell 50,000 foreign currency units in three months at the strike price of $0.39. On May 30, 2014, the customer sent in 50,000 foreign currency units. Quarterly financial reports are prepared on March 31. Ignore the time value of money. Relevant exchange rates are as follows:
Required:
Prepare the journal entries required for these transactions, if the foreign currency option is designated as a fair value hedge.

Question

On March 1, 2014, Amber Company sold goods to a foreign customer at a price of 50,000 foreign currency units. The customer will pay in three months. At the time of the sale, Amber paid $2,000 to acquire an option to sell 50,000 foreign currency units in three months at the strike price of $0.39. On May 30, 2014, the customer sent in 50,000 foreign currency units. Quarterly financial reports are prepared on March 31. Ignore the time value of money. Relevant exchange rates are as follows:
  Required:
Prepare the journal entries required for these transactions, if the foreign currency option is designated as a fair value hedge.

Quizplus · Accepted Answer

The Answer of On March 1, 2014, Amber Company sold goods to a foreign customer at a price of 50,000 foreign currency units. The customer will pay in three months. At the time of the sale, Amber paid $2,000 to acquire an option to sell 50,000 foreign currency units in three months at the strike price of $0.39. On May 30, 2014, the customer sent in 50,000 foreign currency units. Quarterly financial reports are prepared on March 31. Ignore the time value of money. Relevant exchange rates are as follows:
  Required:
Prepare the journal entries required for these transactions, if the foreign currency option is designated as a fair value hedge.

On March 1, 2014, Amber Company Sold Goods to a Foreign