Based on past experience, Maas Corp. (a U.S.-based company) expects to purchase raw materials from a foreign supplier at a cost of 1,500,000 francs on March 15, 2021. To hedge this forecasted transaction, on December 15, 2020, the company acquires a call option to purchase 1,500,000 francs in three months. Maas selects a strike price of $0.63 per franc when the spot rate is $0.63 and pays a premium of $0.005 per franc. The spot rate increases to $0.634 at December 31, 2020, causing the fair value of the option to increase to $13,000. By March 15, 2021, when the raw materials are purchased, the spot rate has climbed to $0.65, resulting in a fair value for the option of $30,000. The raw materials are used in assembling finished products, which are sold by December 31, 2021, when Maas prepares its annual financial statements.

1. Prepare all journal entries for the option hedge of a forecasted transaction and for the purchase of raw materials.

2. What is the overall impact on net income over the two accounting periods?

3. What is the net cash outflow to acquire the raw materials?

Please answer all questions and make sure the answers are correct~! Thank you :)

Req A Reg Band C Prepare all journal entries for the option hedge of a forecasted transaction and for the purchase of raw materials. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) No Date General Journal Debit Credit 1 12/15/2020 7.500 Foreign currency option Cash 7.500 2 12/15/2020 No journal entry required 3 12/31/2020 5,500 Foreign currency option Accumulated other comprehensive income IX 5,500 4 12/31/2020 500 Option expense Accumulated other comprehensive income x x 500 5 03/15/2021 17.000 Foreign currency option Accumulated other comprehensive income x 17.000 6 03/15/2021 7,000 Option expense Accumulated other comprehensive income x x 7.000 7 03/15/2021 975,000 Foreign currency (francs) Cash 975,000 03/15/2021 30,000 Accumulated other comprehensive income Cash XX 30.000 X Reg A Reg Band c b. What is the overall impact on net income over the two accounting periods? (Negative amounts should be entered with a minus sign.) C. What is the net cash outflow to acquire the raw materials? Impact on Net Income Impact on net income in 2020 S 500 X Impact on net income in 2021 (951,500) X Net cash outflow IS 952,500 b. S c