Brandlin Company of Anaheim, California, sells parts to a foreign customer on December 1, 2015, with payment of 22,000 korunas to be received on March 1, 2016. Brandlin enters into a forward contract on December 1, 2015, to sell 22,000 korunas on March 1, 2016. Relevant exchange rates for the koruna on various dates are as follows:

Date	Spot Rate		Forward Rate (to March 1, 2016)
December 1, 2015	$	3.30	$	3.375
December 31, 2015		3.40		3.500
March 1, 2016		3.55		N/A

Brandlins incremental borrowing rate is 12 percent. The present value factor for two months at an annual interest rate of 12 percent (1 percent per month) is 0.9803. Brandlin must close its books and prepare financial statements at December 31.

a-1.

Assuming that Brandlin designates the forward contract as a cash flow hedge of a foreign currency receivable and recognizes any premium or discount using the straight-line method, prepare journal entries for these transactions in U.S. dollars. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations. Round your final answers to 2 decimal places.) 1. Record the sales and foreign currency account receivable. 2. Record the forward contract. 3. Record the entry for changes in the exchange rate. 4. Record the change in the fair value of the forward contract. 5. Record the gain or loss on the forward contract. 6. Record the allocation of the premium or discount. 7. Record the entry for changes in the exchange rate. 8. Record the entry to adjust the carrying value of the forward contract to its current fair value. 9. Record the gain or loss on the forward contract. 10. Record the allocation of the premium or discount. 11. Record the receipt of korunas from the foreign customer. 12. Record the settlement of the forward contract.

a-2.	What is the impact on 2015 net income? (Do not round intermediate calculations.)

a-3.	What is the impact on 2016 net income? (Do not round intermediate calculations.)

a-4.	What is the impact on net income over the two accounting periods? (Do not round intermediate calculations.)

b-1.

Assuming that Brandlin designates the forward contract as a fair value hedge of a foreign currency receivable, prepare journal entries for these transactions in U.S. dollars. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations. Round your final answers to 2 decimal places.) 1. Record the sales and foreign currency account receivable. 2. Record the forward contract. 3. Record the entry for changes in the exchange rate. 4. Record the change in the fair value of the forward contract. 5. Record the gain or loss on the forward contract. 6. Record the allocation of the premium or discount. 7. Record the entry for changes in the exchange rate. 8. Record the entry to adjust the carrying value of the forward contract to its current fair value. 9. Record the gain or loss on the forward contract. 10. Record the allocation of the premium or discount. 11. Record the receipt of korunas from the foreign customer. 12. Record the settlement of the forward contract.

b-2.	What is the impact on 2015 net income? (Do not round intermediate calculations. Round your final answers to 2 decimal places.)

b-3.	What is the impact on 2016 net income? (Do not round intermediate calculations. Round your final answers to 2 decimal places.)

b-4.	What is the impact on net income over the two accounting periods? (Do not round intermediate calculations.)