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Brandlin Company of Anaheim, Callfornia, sells parts to a foreign customer on December 1, 2017, with payment of 19,000 korunas to be received on March

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Brandlin Company of Anaheim, Callfornia, sells parts to a foreign customer on December 1, 2017, with payment of 19,000 korunas to be received on March 1, 2018. Brandiin enters into a forward contract on December 1, 2017, to sell 19.000 korunas on March 1, 2018. Relevant exchange rates for the koruna on various dates are as follows: Date December 1, 2017 December 31, 2017 March 1, 2018 Spot Rate $ 3.70 3.80 3.95 Forward Rate (to March 1, 2018) $ 3.775 3.900 N/A Brandlin's incremental borrowing rate is 9 percent. The present value factor for two months at an annual Interest rate of 9 percent (0.75 percent per month) is 0.9852. 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. a-2. What is the impact on 2017 net income? a-3. What is the impact on 2018 net income? a-4. What is the impact on net income over the two accounting periods? 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. b-2. What is the impact on 2017 net income? b-3. What is the impact on 2018 net income? b-4. What is the impact on net income over the two accounting periods? Pirnir 1 of 6 hlaut Journal entry worksheet Record the sales and foreign currency account receivable. Note: Enter debits before credits Credit Date 12/01/2017 General Journal Accounts receivable (K) Sales Debit 70,300.00 70,300.00 Journal entry worksheet Record the entry for changes in the exchange rate. Note: Enter debits before credits Credit Date General Journal 12/31/2017 Accounts receivable (K) Foreign exchange gain Debit 1,900.00 1,900.00 Journal entry worksheet Record the change in the fair value of the forward contract. Note: Enter debits before credits, Credit Date General Journal 12/31/2017 Loss on forward contract Forward contract Debit 2,339.85 2,339.85 Prey 1 of 6 Next > View transaction list Journal entry worksheet Record the gain or loss on the forward contract. Note: Enter debits before credits. Credit Date General Journal 12/31/2017 Accounts receivable (K) Foreign exchange gain Debit 2,850.00 2,850.00 Prey 1 of 6 # Next > 82 O N Journal entry worksheet Record the allocation of the premium or discount. Note: Enter debits before credits. Date General Journal 12/31/2017 Loss on forward contract Forward contract Debit 985.15 Credit 985.15 Record entry Clear entry View general journal

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