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Icebreaker Company ( a U . S . - based company ) purchases materials from a foreign supplier on December 1 , 2 0 2
Icebreaker Company a USbased company purchases materials from a foreign supplier on December with
payment of dinars to be made on March The materials are consumed immediately and recognized as cost of
goods sold at the date of purchase. On December Icebreaker enters into a forward contract to purchase
dinars on March Relevant exchange rates for the dinar on various dates are as follows:
Required:
a 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 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 payable, prepare
journal entries for the import purchase and foreign currency forward contract in US dollars.
b What is the impact on net income in and in
b What is the impact on net income over the two accounting periods?
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