On March Derby Corporation a USbased company expects to order merchandise from a supplier in Norway in three months. On March when the spot rate is $ per Norwegian krone, Derby enters into a forward contract to purchase Norwegian kroner at a threemonth forward rate of $ Forward points are excluded in assessing the forward contract\'s effectiveness as a hedge, and are amortized to net income on a straightline basis. At the end of three months, when the spot rate is $ per Norwegian krone, Derby orders and receives the merchandise, paying kroner. The merchandise is sold within days.

Required:

a Prepare all journal entries for Derby Corporation related to this transaction and hedge.

a 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?

Please make sure to include appropriate journals:

Record the entry to recognize the order to be made by the company from a supplier in Norway in three months.

Record the entry to recognize forward contract as an asset or liability.

Record the entry to recognize the forward contract premium or discount.

Record settlement of the forward contract and record the foreign currenct received.

Record the purchase of inventory.

Record COGS when inventory is sold.

Record the entry to close the amount in AOCI related to the forward contract.