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2. The Budvar Company sells parts to a foreign customer on December 1, Year 1, with payment of 20,000 crowns to be received on March1, Year 2. Budvar enters into a forward contract on December1, Year 1, to sell 20,00o0 crowns on March 1, Year 2. Relevant exchanges rates for the crown on March1, Year2. Relevant exchange rates for the crown on various dates are as follows: Forward Rate (to March 1, Year 2) Date Spot Rate $1 $1.05 $1.12 $1.04 December 1, Year 1 December 31, Year 1 $1.10 March 1, Year 2 Budvar/s incremental borrowing rate is 12 percent. The Present Value factor for two months at an annual interest rate of 12 percent (1 percent per month) is 0.9803. Budvar must close its books and prepare financial statements at December 31. Required: a. Assuming that Budvar designates the forward contract as a cash flow hedge of a foreign currency receivable, prepare journal entries for these transactions in US dollars. What is the impact on Year 1 net income? What is the impact on Year 2 net income? What is the impact on net income over the two accounting periods? b. Assuming that Budvar designates the forward contract as a fair value hedge of a foreign currency receivable, prepare journal entries for these transactions in US dollars. What is the impact on Year 1 net income ? What is the impact on Year 2 net income ? What is the impact on net income over the two accounting periods