Icebreaker Company ( a U . S . - based company ) sells parts to a foreign
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Icebreaker Company a USbased company sells parts to a foreign customer on December with payment of dinars to
be received on March Icebreaker enters into a forward contract on December to sell dinars on March
The forward points on the forward contract are excluded in assessing hedge effectiveness and are amortized to net income using a
straightline method on a monthly basis. Relevant exchange rates for the dinar on various dates are as follows:
Skipped
Icebreaker must close its books and prepare financial statements at December
Required:
a Assuming that Icebreaker designates the forward contract as a cash flow hedge of a foreign currency receivable, prepare journal
entries for the sale and foreign currency forward contract in US dollars.
a What is the impact on net income?
a What is the impact on net income?
a What is the impact on net income over the two accounting periods?
b Assuming that Icebreaker designates the forward contract as a fair value hedge of a foreign currency receivable, prepare journal
entries for the sale and foreign currency forward contract in US dollars.
b What is the impact on net income?
b What is the impact on net income?
b What is the impact on net income over the two accounting periods?
Complete this question by entering your answers in the tabs below.
Req A to A
Req B to B
Assuming that Icebreaker designates the forward contract as a cash flow hedge of a foreign currency receivable, prepare journal entries
for the sale and foreign currency forward contract in US dollars.
Note: If no entry is required for a transactionevent select No Journal Entry Required" in the first account field. Do not round
intermediate calculations.
Journal entry worksheet
Record the sales and foreign currency account receivable.
Note: Enter debits before credits.
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