On November 1, 2020, Cheng Company (a U.S.-based company) forecasts the purchase of goods from a foreign supplier for 120,000 yuan. Cheng expects to receive the goods on April 30, 2021, and make immediate payment. On November 1, 2020, Cheng enters into a six-month forward contract to buy 120,000 yuan. The company properly designates the forward contract as a cash flow hedge of a forecasted foreign currency transaction. Forward points are excluded in assessing hedge effectiveness and are amortized to net income using a straight-line method on a monthly basis over the life of the contract. The following U.S. dollarYuan exchange rates apply: Date Spot Rate Forward Rate (to April 30, 2021) November 1, 2020 $ 0.23 $ 0.215 December 31, 2020 0.22 0.190 April 30, 2021 0.20 N/A As expected, Cheng receives goods from the foreign supplier on April 30, 2021, and pays 120,000 yuan immediately. Cheng sells the imported goods in the local market in May 2021. Prepare all journal entries, including December 31 adjusting entries, to record the foreign currency forward contract and import purchase. What is the impact on net income in 2020? What is the impact on net income in 2021?

Return to question ! ITUTLULU vv jvu 2 12/31/2020 3,000 > Other comprehensive income Forward contract OO 3,000 3 12/31/2020 600 . Cost of goods sold Other comprehensive income 600 4 04/30/2021 Forward contract 1,200 oo Other comprehensive income 1,200 5 04/30/2021 X 24,000 X Foreign currency (Yuan) Forward contract x x 1,800 x X X Cash 25,800 X 6 04/30/2021 24,000 Inventory Foreign currency (Yuan) X X 24,000 X 7 04/30/2021 x 24,000 Cost of goods sold Inventory x 24,000 Red Bandic a. Prepare all journal entries, including December 31 adjusting entries, to record the foreign currency forward contract and import purchase. b. What is the impact on net income in 2020? c. What is the impact on net income in 2021? Answer is not complete. Complete this question by entering your answers in the tabs below. Reg A Req B and C b. What is the impact on net income in 2020? c. What is the impact on net income in 2021? (Negative amounts should be entered with a minus sign. Do not round intermediate calculations.) b. Impact on net income in 2020 Impact on net income in 2021 5,300 X 600 X c. $ Return to question ! ITUTLULU vv jvu 2 12/31/2020 3,000 > Other comprehensive income Forward contract OO 3,000 3 12/31/2020 600 . Cost of goods sold Other comprehensive income 600 4 04/30/2021 Forward contract 1,200 oo Other comprehensive income 1,200 5 04/30/2021 X 24,000 X Foreign currency (Yuan) Forward contract x x 1,800 x X X Cash 25,800 X 6 04/30/2021 24,000 Inventory Foreign currency (Yuan) X X 24,000 X 7 04/30/2021 x 24,000 Cost of goods sold Inventory x 24,000 Red Bandic a. Prepare all journal entries, including December 31 adjusting entries, to record the foreign currency forward contract and import purchase. b. What is the impact on net income in 2020? c. What is the impact on net income in 2021? Answer is not complete. Complete this question by entering your answers in the tabs below. Reg A Req B and C b. What is the impact on net income in 2020? c. What is the impact on net income in 2021? (Negative amounts should be entered with a minus sign. Do not round intermediate calculations.) b. Impact on net income in 2020 Impact on net income in 2021 5,300 X 600 X c. $