On June 1, Alexander Corporation sold goods to a foreign customer at a price of 1,050,000 pesos and will receive payment in three months on September 1. On June 1, Alexander acquired an option to sell 1,050,000 pesos in three months at a strike price of $0.063. Relevant exchange rates and option premiums for the peso are as follows: Date Spot Rate Put Option Premium for September 1 (strike price $0.063) June 1 $ 0.063 $ 0.0028 June 30 0.068 0.0022 September 1 0.062 N/A Alexander must close its books and prepare its second-quarter financial statements on June 30. For ACCN7120: please ignore requirements a-1 and a-2 and solve only requirements b1 and b-2. The fair values of the option contract are in the course website under Module 7.

a-1. Assuming that Alexander designates the foreign currency option as a cash flow hedge of a foreign currency receivable, prepare journal entries for these transactions in U. S. dollars.
a-2. What is the impact on net income over the two accounting periods?

Kandon enterprises, inc., has two operating divisions; one manufactures machinery and the other breeds and sells horses. both divisions are considered separate components as defined by generally accepted accounting principles. the horse division has been unprofitable, and on november 15, 2018, kandon adopted a formal plan to sell the division. the sale was completed on april 30, 2019. at december 31, 2018, the component was considered held for sale. on december 31, 2018, the company’s fiscal year-end, the book value of the assets of the horse division was $415,000. on that date, the fair value of the assets, less costs to sell, was $350,000. the before-tax loss from operations of the division for the year was $290,000. the company’s effective tax rate is 40%. the after-tax income from continuing operations for 2018 was $550,000. required: 1. prepare a partial income statement for 2018 beginning with income from continuing operations. ignore eps disclosures. 2. prepare a partial income statement for 2018 beginning with income from continuing operations. assuming that the estimated net fair value of the horse division’s assets was $700,000, instead of $350,000. ignore eps disclosures.