The Atlantic Ocean has a higher average surface salinity tha…
Questions
The Atlаntic Oceаn hаs a higher average surface salinity than the Pacific Ocean.
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Use the infоrmаtiоn belоw for questions 17-19. Assume thаt the compаny will use hedge accounting and has designated the option as a cash flow hedge. On December 1, 2021, our company makes a nonbinding purchase order with a supplier that is located in the Netherlands, with delivery of the merchandise scheduled for Feburary 1, 2022. The company agreed to pay €1,000,000 for the inventory, and payment is due to the supplier upon delivery of the inventory. On December 1, 2021, our company also purchases for $10,000 an option for the right to buy €1,000,000 on any date until February 1, 2022 for $1.22:€1 (i.e., the spot rate on Dec. 1, 2021). In addition, our company elected to immediately include in the determination of net income all of the change in option value attributable to factors excluded from the assessment of hedge effectiveness. Relevant exchange rates and related balances for the period from Dec. 1, 2021 to Feb. 1, 2022, are as follows: Option Contract Date Spot rate($USD to €Euro) Purchase Transaction Fair value Change inFair value Intrinsic value Change inIntrinsic value Other sourcesof value Change in othersources of value 12/1/2021 1.22 10,000 10,000 12/31/2021 1.25 35,000 25,000 30,000 30,000 5,000 (5,000) 2/1/2022 1.24 (1,240,000) 20,000 (15,000) 20,000 (10,000) 0 (5,000) The company purchases and receives the inventory from the supplier and exercises the option on Feb 1, 2022. Write the specific journal entries the company must record on specified date below. When writing each journal entry, please use the following format: Dr. Account Name X,XXX Cr. Account Name X,XXX December 31, 2021 What journal entry should the company make to record the change in fair value of the option contract?