Icebreaker Company (a U.S.-based company) purchases materials from a foreign supplier on December 1, 2020, with payment of 31,000 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 31.000 dinars on March 1, 2021. Relevant exchange rates for the dinar on various dates are as follows: Date December 1, 2020 December 31, 2020 March 1, 2021 Spot Rate $ 4.90 5.00 5.15 Forward Rate (to March 1, 2021) $ 4.975 5.100 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 Debit Credit 1 12/01/2020 General Journal Accounts receivable (dinars) Sales 151,900 151,900 2 12/01/2020 No journal entry required 3 12/31/2020 Accounts payable (dinars) Foreign exchange gain or loss 3,100 3,100 4 12/31/2020 Other comprehensive income Forward contract 3,875 3,875 5 12/31/2020 3.100 Foreign exchange gain or loss Other comprehensive income 3,100 %% 6 6 12/31/2020 775 Other comprehensive income Foreign exchange gain or loss 775 7 7 03/01/2021 4,650 S Accounts receivable (dinars) Foreign exchange gain or loss X 4,650 1 US/UT/ZUZE Accounts receivable (ainars) Foreign exchange gain or loss 4,650 V XIX 4,650 8 03/01/2021 Other comprehensive income Forward contract 1,550 X 1,550 9 03/01/2021 4,650 Foreign exchange gain or loss Other comprehensive income 4,650 10 03/01/2021 1,550 Other comprehensive income Foreign exchange gain or loss 1,550 11 03/01/2021 1,559,650 Foreign currency (dinars) Accounts receivable (dinars) 1,559,650 12 03/01/2021 Cash 154,225 5,425 Forward contract X Foreign currency (dinars) 159,650 Req A1 Reg A2 to A4 Req B1 Req B2 to B3 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? (Do not round intermediate calculations. Negative amounts should be entered with a minus sign.) Impact on 2020 net income a- 2. a- 3. a- 4. Impact on 2021 net income $ 775 Impact on net income over 2020 and 2021 Debit Credit 1 12/01/2020 Accounts receivable (dinars) Sales XX > 2 12/01/2020 No journal entry required 12/31/2020 Accounts receivable (dinars) Foreign exchange gain or loss 4 12/31/2020 Foreign exchange gain or loss Forward contract 5 12/31/2020 No journal entry required 6 12/31/2020 Other comprehensive income Foreign exchange gain or loss 7 03/01/2021 Accounts receivable (dinars) Foreign exchange gain or loss 8 03/01/2021 No journal entry required 9 03/01/2021 X Accounts payable (dinars) Cash 10 03/01/2021 Foreign exchange gain or loss Accumulated other comprehensive income 11 03/01/2021 Foreign currency (dinars) Accounts receivable (dinars) 12 03/01/2021 Cash Forward contract Foreign currency (dinars) Answer is not complete. Complete this question by entering your answers in the tabs below. Req A1 Req A2 to A4 Req B1 Req B2 to B3 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? (Do not round intermediate calculations. Negative amounts should be entered with a minus sign.) b- 2. Impact on 2020 net income Impact on 2021 net income Impact on net income over 2020 and 2021 b- 3. Journal entry worksheet Record the entry to revalue the foreign currency account receivable. Note: Enter debits before credits. Debit Credit Date General Journal 03/01/2021 Accounts receivable (dinars) Foreign exchange gain or loss Journal entry worksheet Record the foreign exchange gain or loss on the forward contract. Note: Enter debits before credits. Debit Credit Date General Journal 03/01/2021 No journal entry required 1 5 6 7 8 9 10 11 12 Record the settlement of the forward contract. Note: Enter debits before credits. Debit Credit Date General Journal 03/01/2021 Accounts payable (dinars) Cash 5 7 8 9 10 11 12 > Record the entry to adjust the net amount recognized as foreign exchange gain or loss to reflect the amortization of the forward contract premium or discount. Note: Enter debits before credits. Debit Credit Date General Journal 03/01/2021 Foreign exchange gain or loss Accumulated other comprehensive income 2 12/01/2020 No journal entry required 12/31/2020 Accounts receivable (dinars) Foreign exchange gain or loss 4 12/31/2020 Foreign exchange gain or loss Forward contract 5 12/31/2020 No journal entry required 6 12/31/2020 Other comprehensive income Foreign exchange gain or loss 7 03/01/2021 Accounts receivable (dinars) Foreign exchange gain or loss 8 03/01/2021 No journal entry required 9 03/01/2021 X Accounts payable (dinars) Cash 10 03/01/2021 Foreign exchange gain or loss Accumulated other comprehensive income 11 03/01/2021 Foreign currency (dinars) Accounts receivable (dinars) 12 03/01/2021 Cash Forward contract Foreign currency (dinars) Answer is not complete. Complete this question by entering your answers in the tabs below. Req A1 Req A2 to A4 Req B1 Req B2 to B3 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? (Do not round intermediate calculations. Negative amounts should be entered with a minus sign.) b- 2. Impact on 2020 net income Impact on 2021 net income Impact on net income over 2020 and 2021 b- 3. Journal entry worksheet Record the entry to revalue the foreign currency account receivable. Note: Enter debits before credits. Debit Credit Date General Journal 03/01/2021 Accounts receivable (dinars) Foreign exchange gain or loss Journal entry worksheet Record the foreign exchange gain or loss on the forward contract. Note: Enter debits before credits. Debit Credit Date General Journal 03/01/2021 No journal entry required 1 5 6 7 8 9 10 11 12 Record the settlement of the forward contract. Note: Enter debits before credits. Debit Credit Date General Journal 03/01/2021 Accounts payable (dinars) Cash 5 7 8 9 10 11 12 > Record the entry to adjust the net amount recognized as foreign exchange gain or loss to reflect the amortization of the forward contract premium or discount. Note: Enter debits before credits. Debit Credit Date General Journal 03/01/2021 Foreign exchange gain or loss Accumulated other comprehensive income