Icebreaker Company (a US based company) purchases materials from a foreign supplier on December 1, 2020, with a 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. Icebreaker enters into a forward contract on December 1, 2020, to purchase 16,000 dinars on March, 1 2021. The forward points on the forward contract are excluded in assessing hedge effectiveness and are amortized to net income using a straight-line method on a monthly basis. Relevant exchange rates for the dinar on various dates are as follows:

Date Spot Rate Forward Rate (to 3/1/21)

December 1, 2020 $2.70 $2.775

December 31, 2020 2.80 2.900

March 1, 2021 2.95 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 is in US 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 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 is in US dollars. b-2) What is the impact on net income in 2020 and 2021? b-3) What is the impact on net income over the two accounting periods?