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On October 1, 2021, Eagle Company forecasts thepurchase of inventory from a British supplier on February 1,2022, at a price of 100,000 British pounds. On October 1,2021, Eagle pays $1,800 for a three-month call option on100,000 pounds with a strike price of $2.00 per pound. Theoption is considered to be a cash flow hedge of a forecastedforeign currency transaction. On December 31, 2021, theoption has a fair value of $1,600. The following spotexchange rates apply:DateOctober 1, 2021December 31, 2021February 1, 2022

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The journal entry that  Eagle should  prepare on October 1, 2021 is:

Debit Foreign Currency Option $1,800; Credit Cash $1,800.

What is Journal entries?

Since Eagle pays the amount of $1,800 for a three-month call option  and  on December 31, 2021, the option has a fair value of $1,600. The journal entry that  Eagle should  prepare on October 1, 2021 December 31, 2021 are:

Eagle company

October 1, 2021

Debit Foreign Currency Option $1,800

Credit Cash $1,800

December 31, 2021

Debit Option Expense $200

Credit Foreign Currency Option $200

($1,800-$1,600)

Therefore entry that  Eagle should  prepare on October 1, 2021 is: Debit Foreign Currency Option $1,800; Credit Cash $1,800.

Learn more about journal entry here:https://brainly.com/question/14279491

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