Based on past experience, Maas Corporation $($a U$.$S$.-$based company$)$ expects to purchase raw materials from a foreign supplier at a cost of $\backslash (1,100,000\backslash )$ francs on March $15,2024.$ To hedge this forecasted transaction, on December $15,2023,$ the company acquires a call option to purchase $\backslash (1,100\mathrm{.}000\backslash )$ francs in three months. Maas selects a strike price of $\backslash (\backslash$$ $0\mathrm{.}70\backslash )$ per franc when the spot rate is $\backslash (\backslash$$ $0\mathrm{.}70\backslash )$ and pays a premium of $\backslash (\backslash$$ $0\mathrm{.}002\backslash )$ per franc. The spot rate increases to $\backslash (\backslash$$ $0\mathrm{.}706\backslash )$ at December $31,2023,$ causing the fair value of the option to increase to $\backslash (\backslash$$ $8,500\backslash ).$ By March $15,2024,$ when the raw materials are purchased, the spot rate has climbed to $\backslash (\backslash$$ $0\mathrm{.}72\backslash ),$ resulting in a fair value for the option of $\backslash (\backslash$$ $22,000\backslash ).$ The raw materials are used in assembling finished products, which are sold by December $31,2024,$ when Maas prepares its annual financial statements.

Required:

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

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

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

Answer is not complete.

Complete this question by entering your answers in the tabs below.

Req $\backslash ($ A $\backslash )$

Req $\backslash ($ B $\backslash )$ and $\backslash ($ C $\backslash )$

Prepare all journal entries for the option hedge of a forecasted transaction and for the purchase of raw materials. Note: If no entry is required for a transaction$/$event$,$ select $"$No Journal Entry Required" in the first account field. Based on past experience, Maas Corporation $($a U$.$S$.-$based company$)$ expects to purchase raw materials from a foreign supplier at a cost of $\backslash (1,100,000\backslash )$ francs on March $15,2024.$ To hedge this forecasted transaction, on December $15,2023,$ the company acquires a call option to purchase $\backslash (1,100,000\backslash )$ francs in three months. Maas selects a strike price of $\backslash (\backslash$$ $0\mathrm{.}70\backslash )$ per franc when the spot rate is $\backslash (\backslash$$ $0\mathrm{.}70\backslash )$ and pays a premium of $\backslash (\backslash$$ $0\mathrm{.}002\backslash )$ per franc. The spot rate increases to $\backslash (\backslash$$ $0\mathrm{.}706\backslash )$ at December $31,2023,$ causing the fair value of the option to increase to $\backslash (\backslash$$ $8,500\backslash ).$ By March $15,2024,$ when the raw materials are purchased, the spot rate has climbed to $\backslash (\backslash$$ $0\mathrm{.}72\backslash ),$ resulting in a fair value for the option of $\backslash (\backslash$$ $22,000\backslash ).$ The raw materials are used in assembling finished products, which are sold by December $31,2024.$ when Maas prepares its annual financial statements.

Required:

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

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

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

Answer is not complete.

Complete this question by entering your answers in the tabs below.

Req B and C

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

Note: Negative amounts should be entered with a minus sign.

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