Problem M-5 (LO 8) Prepare entries to account for a cash ow hedge involving an option. Industrial Plating Corporation coats manufactured parts with a...

I only have this last problem to complete my course. The offering of $20 is also all I have. Problem M-5 (LO 8) Prepare entries to account for a cash flow hedge involvingan option. Industrial Plating Corporation coats manufactured parts with a variety of coatingssuch as Teflon, gold, and silver. The company intends to purchase 100,000 troy ounces of silverin September. The purchase is highly probable, and the company has become concerned thatthe prices of silver may increase, and, therefore, the forecasted purchase will become even moreexpensive. In order to reduce the exposure to rising silver prices, on July 10 the company pur-chased 20 September call (buy) options on silver. Each option is for 5,000 troy ounces and has astrike price of $5.00 per troy ounce. The company excludes from hedge effectiveness changes inthe time value of the option. Spot prices and option value per troy ounce of silver are as follows:July 10