Icebreaker Company $($a U$.$S$.-$based company$)$ purchases materials from a foreign supplier on December $1,2020,$ with payment of $16,000$ dinars to be made on March $1,2021.$ The materials are consumed immediately and recognized as cost of goods sold at the date of purchase. On December $1,2020,$ Icebreaker enters into a forward contract to purchase $16,000$ dinars on March $1,2021.$

Relevant exchange rates for the dinar on various dates are as follows:

Date Spot Rate Forward Rate

$($to March $1,2021)$

December $1,2020$ $ $2\mathrm{.}70$ $ $2\mathrm{.}775$

December $31,20202\mathrm{.}802\mathrm{.}900$

March $1,20212\mathrm{.}95$ N$/$A

a$-1.$ Assuming that Icebreaker designates the forward contract as a cash flow hedge of a foreign currency payable, prepare journal entries for the import purchase and foreign currency forward contract in U$.$S$.$ dollars.

a$-2.$ What is the impact on $2020$ net income?

a$-3.$ What is the impact on $2021$ net income?

a$-4.$ What is the impact on net income over the two accounting periods?

b$-1.$ Assuming that Icebreaker designates the forward contract as a fair value hedge of a foreign currency payable, prepare journal entries for the import purchase and foreign currency forward contract in U$.$S$.$ dollars.

b$-2.$ What is the impact on net income in $2020$ and in $2021?$

b$-3.$ What is the impact on net income over the two accounting periods?

No Date General Journal Debit Credit

$112/01/2020$ Cost of goods sold $43,200$

Accounts payable $($dinars$)43,200$

$212/01/2020$ No journal entry required

$312/31/2020$ Accounts receivable $($dinars$)1,600$

Foreign exchange gain or loss $1,600$

$412/31/2020$ Other comprehensive income $2,000$

Forward contract $2,000$

$512/31/2020$ Foreign exchange gain or loss $1,600$

Other comprehensive income $1,600$

$612/31/2020$ Other comprehensive income $400$

Foreign exchange gain or loss $400$

$703/01/2021$ Accounts receivable $($dinars$)2,400$

Foreign exchange gain or loss $2,400$

$803/01/2021$ Other comprehensive income $800$

Forward contract $800$

$903/01/2021$ Foreign exchange gain or loss $2,400$

Other comprehensive income $2,400$

$1003/01/2021$ Other comprehensive income $800$

Foreign exchange gain or loss $800$

$1103/01/2021$ Foreign currency $($dinars$)47,200$

Accounts receivable $($dinars$)47,200$

$1203/01/2021$ Cash $44,400$

Forward contract $2,800$

Foreign currency $($dinars$)47,200$

$-2.$ What is the impact on net income in $2020$ and in $2021?$

b$-3.$ What is the impact on net income over the two accounting periods?

$($Do not round intermediate calculations. Negative amounts should be entered with a minus sign.$)$

b$-2.$ Impact on $2020$ net income $$43,600$

Impact on $2021$ net income $$800$