On December $1,2024,$ King Company sold inventory to a customer in a foreign country. King agreed to accept $96,000$ local currency units $($LCU$)$ in full payment for this inventory. Payment was to be made on February $1,2025.$ On the date of sale, King entered into a forward exchange contract wherein $96,000$ LCU would be delivered to a currency broker in two months. The two$-$month forward exchange rate on that date was $1$ LCU $=$ $$0\mathrm{.}30.$ Any contract discount or premium is amortized using the straight$-$line method. The spot rates and forward rates on various dates were as follows:

Date Rate Description Exchange Rate

December $1,2024$ Spot Rate $ $0\mathrm{.}32=1$ LCU

$2-$Month Forward Rate $ $0\mathrm{.}30=1$ LCU

December $31,2024$ Spot Rate $ $0\mathrm{.}29=1$ LCU

$1-$Month Forward Rate $ $0\mathrm{.}28=1$ LCU

February $1,2025$ Spot Rate $ $0\mathrm{.}27=1$ LCU

Required:

Assume this hedge is designated as a fair value hedge. Prepare the journal entries relating to the transaction and the forward contract.

Compute the effect on $2024$ net income.

Compute the effect on $2025$ net income.