Problem $9-31($Algo$)($LO $9-7)$

Icebreaker Company $($a U$.$S$.-$based company$)$ sells parts to a foreign customer on December $1,2023,$ with payment of $27,000$ dinars to be received on March $1,2024.$ Icebreaker enters into a forward contract on December $1,2023,$ to sell $27,000$ dinars on March $1,2024.$ The forward points on the forward contract are excluded in assessing hedge effectiveness and are amortized to net income using a straight$-$line method on a monthly basis. Relevant exchange rates for the dinar on various dates are as follows:

Date Spot Rate Forward Rate $($to March $1,2024)$

December $1,2023$ $ $4\mathrm{.}50$ $ $4\mathrm{.}575$

December $31,20234\mathrm{.}604\mathrm{.}700$

March $1,20244\mathrm{.}75$ N$/$A

Icebreaker must close its books and prepare financial statements at December $31.$

Required:

a$-1.$ Assuming that Icebreaker designates the forward contract as a cash flow hedge of a foreign currency receivable, prepare journal entries for the sale and foreign currency forward contract in U$.$S$.$ dollars.

a$-2.$ What is the impact on $2023$ net income?

a$-3.$ What is the impact on $2024$ net income?

a$-4.$ What is the impact on net income over the two accounting periods?

b$-1.$ Assuming that Icebreaker designates the forward contract as a fair value hedge of a foreign currency receivable, prepare journal entries for the sale and foreign currency forward contract in U$.$S$.$ dollars.

b$-2.$ What is the impact on $2023$ net income?

b$-3.$ What is the impact on $2024$ net income?

b$-4.$ What is the impact on net income over the two accounting periods?