Based on past experience, Maas Corporation $($a U$.$S$.-$based company$)$ expects to purchase raw materials from a foreign supplier at a cost of $1,700,000$ francs on March $15,2024.$ To hedge this forecasted transaction, on December $15,2023,$ the company acquires a call option to purchase $1,700,000$ francs in three months. Maas selects a strike price of $$0\mathrm{.}65$ per franc when the spot rate is $$0\mathrm{.}65$ and pays a premium of $$0\mathrm{.}002$ per franc. The spot rate increases to $$0\mathrm{.}653$ at December $31,2023,$ causing the fair value of the option to increase to $$7,000.$ By March $15,2024,$ when the raw materials are purchased, the spot rate has climbed to $$0\mathrm{.}67,$ resulting in a fair value for the option of $$34,000.$ 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.

$1.$ Record purchase of foreign currency option as an asset.

$2.$Record entry for order placed with foreign supplier.

$3.$ Record the entry to recognize the increase in the value of the foreign currency option.

$4.$ Record entry to recognize the decrease in the time value of the option as an increase in cost of goods sold.

$5.$ Record the entry to recognize the increase in the value of the foreign currency option.

$6.$ Record entry to recognize the decrease in the time value of the option as an increase in cost of goods sold.

$7.$ Record the exercise of foreign currency option.

$8.$ Record the purchase of inventory.

$9.$ Record entry to transfer the amount accumulated in AOCI.

$10.$Record entry to transfer the cost of the raw materials to cost of goods sold.

B$.$ What is the overall impact on net income over the two accounting periods, $2023$ and $2024?$

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