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On March 1 , Derby Corporation ( a U . S . - based company ) expects to order merchandise from a supplier in Norway

On March 1, Derby Corporation (a U.S.-based company) expects to order merchandise from a supplier in Norway in three months. On March 1, when the spot rate is $0.42 per Norwegian krone, Derby enters into a forward contract to purchase 735,000 Norwegian kroner at a three-month forward rate of $0.44. Forward points are excluded in assessing the forward contract's effectiveness as a hedge, and are amortized to net income on a straight-line basis. At the end of three months, when the spot rate is $0.431 per Norwegian krone, Derby orders and receives the merchandise, paying 735,000 kroner. The merchandise is sold within 30 days.
Required:
a-1. Prepare all journal entries for Derby Corporation related to this transaction and hedge.
a-2. What amount should Derby Corporation report in the current years net income as cost of goods sold?
b. What amount should Derby Corporation report in the current years net income as foreign exchange gain or loss?

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