1. On 8/1, Coruscant, Inc., a US Based Corporation, forecasts the purchase of 10,000 units of inventory
from a foreign vendor. The forecasted cost is estimated to be 150,000 FC. It is estimated inventory will be
both delivered and paid for in October. Also, on 8/1, Coruscant purchased a call option to buy 150,000
FC at a strike price of $0.60 anytime during October. An option premium of $2,000 was initially paid.
The option was sold on 10/15. The company also received the inventory and paid 150,000 FC on October
15. The company prepares monthly journal entries to record changes in the option value. The company
excludes changes in the time value of the options from hedge effectiveness.
Spot
Fair Value of Option
August 1
$0.58
$2,000
August 31
$0.61
$2,500
September 30
$0.63
$5.100
October 15
$0.635
$5,500
Required:
Prepare the journal entries required from 8/1 through 10/15.
