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Instructions: Prepare the journal entries required on the dates listed: 1. Assuming that on 3/20/2021 the option was exercised, and the inventory delivered and paid. 2. Assuming that the spot rate on 3/20/2021 is $0.76?

Instructions: Prepare the journal entries required on the dates listed: 1. Assuming that on 3/20/2021 the option was exercised, and the inventory delivered and paid. 2. Assuming that the spot rate on 3/20/2021 is $0.76?

FINANCIAL ACCOUNTING
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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Problem IV: On 11/1/2020, Kent Company forecasted the sale of inventory to a foreign customer for 500,000 FCU. It was estimated that the inventory would be delivered and paid on 3/20/2021. Also, on 11/1/2020, the company purchased a put option to sell 500,000 FCU at a strike price of $0.73 expiring end of 2021. An option premium of $9,000 was paid. 1-Nov 31-Dec Spot Rates 0.72 0.77 FV of Option 9,000 7,500 20-Mar 0.71 Instructions: Prepare the journal entries required on the dates listed: 1. Assuming that on 3/20/2021 the option was exercised, and the inventory delivered and paid. 2. Assuming that the spot rate on 3/20/2021 is $0.76?
Transcribed Image Text:Problem IV: On 11/1/2020, Kent Company forecasted the sale of inventory to a foreign customer for 500,000 FCU. It was estimated that the inventory would be delivered and paid on 3/20/2021. Also, on 11/1/2020, the company purchased a put option to sell 500,000 FCU at a strike price of $0.73 expiring end of 2021. An option premium of $9,000 was paid. 1-Nov 31-Dec Spot Rates 0.72 0.77 FV of Option 9,000 7,500 20-Mar 0.71 Instructions: Prepare the journal entries required on the dates listed: 1. Assuming that on 3/20/2021 the option was exercised, and the inventory delivered and paid. 2. Assuming that the spot rate on 3/20/2021 is $0.76?
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