Problem 4: Borla Co. sells auto parts to a foreign customer on May 1, 2015, with payment of 80,000 to be received on August 1, 2015. Borla enters into forward contract on May 1, 2015 to sell 80,000 on August 1, 2015. Relevant exchange rates for the euro on various dates are follows. + 5/1/2015 $1.13 $1.12 + 6/30/20152 $1.14 8/1/2015 $1.10- - - Spot Rates 90-day Forward Rate-| 30-day Forward Rate- $1.132 Borla's incremental borrowing rate is 8% per annum. Borla must close its books and prepare quarterly financial statements on June 30th. + a. Assuming that Borla designates the forward contract as a fair value hedge of a foreign currency receivable, prepare journal entries in U.S. dollars. th b. What is the net income effect of this hedge accounting for the period ending on 6/30/2015? c. What is the net income effect of this hedge accounting for the period ending on 9/30/2015+ d. What is the impact on net income over two accounting periods? tt t Problem 4: Borla Co. sells auto parts to a foreign customer on May 1, 2015, with payment of 80,000 to be received on August 1, 2015. Borla enters into forward contract on May 1, 2015 to sell 80,000 on August 1, 2015. Relevant exchange rates for the euro on various dates are follows. + 5/1/2015 $1.13 $1.12 + 6/30/20152 $1.14 8/1/2015 $1.10- - - Spot Rates 90-day Forward Rate-| 30-day Forward Rate- $1.132 Borla's incremental borrowing rate is 8% per annum. Borla must close its books and prepare quarterly financial statements on June 30th. + a. Assuming that Borla designates the forward contract as a fair value hedge of a foreign currency receivable, prepare journal entries in U.S. dollars. th b. What is the net income effect of this hedge accounting for the period ending on 6/30/2015? c. What is the net income effect of this hedge accounting for the period ending on 9/30/2015+ d. What is the impact on net income over two accounting periods? tt t