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Problem 9-32 (LO 9-7) Brandlin Company of Anaheim, California, purchases materials from a foreign supplier on December 1, 2017, with payment of12,000 korunas to be made on March 1, 2018. The materials are consumed immediately and recognized as cost of goods sold at the date of purchase. On December 1, 2017, Brandlin enters into a forward contract to purchase 12,000 korunas on March 1, 2018. Relevant exchange rates for the koruna on various dates are as follows: Forward Rate Date Spot Rate (to March 1, 2018) December 1, 2017 $ 3.00 $ 3.075 December 31, 2017 3.10 3.200 March 1, 2018 3.25 N/A [ Brandlin's incremental borrowing rate is 12 percent. The present value factor for two months at an annual interest rate of12 percent (1 percent per month) is 0.9803. Brandlin must close its books and prepare financial statements at December 31. a-1. Assuming that Brandlin designates the forward contract as a cash flow hedge of a foreign currency payable and recognizes any premium or discount using the straightline method, preparejournal entries for these transactions in US. dollars. a-2. Assuming that the purchased parts became a part of the cost of goods sold in 2017, what is the impact on 2017 net income? a-3. What is the impact on 2018 net income? a-4. What is the impact on net income over the two accounting periods? b-1. Assuming that Brandlin designates the forward contract as a fair value hedge of a foreign currency payable, preparejournal entries for these transactions in U.S. dollars. b-2. Assuming that the purchased parts became a part of the cost of goods sold in 2017, what is the impact on net income in 2017 and in 2018? b-3. What is the impact on net income over the two accounting periods? Assuming that Brandlin designates the forward contract as a cash flow hedge of a foreign currency payable and recognizes any premium or discount using the straight-line method, prepare journal entries for these transactions in U.S. dollars. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations. Round your answers to 2 decimal places.) Show less A View transaction list Journal entry worksheet Record the purchase of materials. Note: Enter debits before credits. 12/01/2017 Record entry m View general journal Journal entry worksheet Record the forward contract. Note: Enter debits before credits. Record entry Clear entry View general journal Journal entry worksheet Record the entry for changes in the exchange rate. Note: Enter debits before credits. Record entry Clear entry View general journal Journal entry worksheet Record the change in the fair value of the forward contract. Note: Enter debits before credits. Record entry Clear entry View general journal Journal entry worksheet Record the gain or loss on the forward contract. Note: Enter debits before credits. Record entry Clear entry View general journal Journal entry worksheet Record the entry for changes in the exchange rate. Note: Enter debits before credits. Record entry Clear entry View general journal Journal entry worksheet Record the entry to adjust the carrying value of the forward contract to its current fair value. Note: Enter debits before credits. Record entry Clear entry View general journal Journal entry worksheet Record the gain or loss on the forward contract. Note: Enter debits before credits. Record entry Clear entry View general journal Journal entry worksheet Record the allocation of the premium or discount. Note: Enter debits before credits. Record entry Clear entry View general journal Journal entry worksheet Record settlement of the forward contract. Note: Enter debits before credits. Record entry Clear entry View general journal Journal entry worksheet Record the payment of korunas to the foreign supplier. Note: Enter debits before credits. Record entry Clear entry View general journal Req A1 Req A2 to A4 H Req Bl Req BZ to B3 a-2.Assuming that the purchased parts became a part of the cost of goods sold in 2017, what is the impact on 2017 net income? a-3.What is the impact on 2018 net income? a-4.What is the impact on net income over the two accounting periods? (Do not round intermediate calculations. In case of negative impact on income, answer should be entered with a minus sign.) Show less A Impact on 2017 income _ Impact on 2018 income _ Impact on net income over 2017 and 2018 ( Req A1 Req B1 ) Req 32 to B3 Assuming that Brandlin designates the forward contract as a fair value hedge of a foreign currency payable, prepare journal entries for these transactions in U.S. dollars. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations. Round your answers to 2 decimal places.) View transaction list Journal entry worksheet Record the purchase of materials. Note: Enter debits before credits. Record entry m View general journal Show less A Req A1 Req A2 to A4 Req Bl Req 32 to B3 b-2.Assuming that the purchased parts became a part of the cost of goods sold in 2017, what is the impact on net income in 2017 and in 2018? b-3.what is the impact on net income over the two accounting periods? (Do not round intermediate calculations. Round your answers to 2 decimal places. In case of negative impact on income, answer should be entered with a minus sign.) Show less A - Impact on 2017 income _ - Impact on 2018 Income _ Impact on net income over 2017 and 2018
