On August 1, Felix imports inventory from its Chinese supplier at a price of 1 million Chinese yuan. It receives the inventory on August 1, but it does not pay for it until October 31. On August 1, Felix purchases a three-month call option on 1 million Chinese yuan with a strike price of $0.143. The time value of the option is excluded from the assessment of hedge effectiveness, and the change in time value is recognized in net income over the life of the option. The inventory is sold in November. Assume that the option is designated as a fair value hedge of the foreign currency liability. Required:
Prepare all the necessary journal entries