Required:

$$ Assume the olive oil was ordered on December $1,$ Year $1.$ It was

received and paid for on January $31,$ Year $2.$ On December $1,$ Zorba

Company entered into a two$-$month forward contract to purchase

$50,000$ crowns. The forward contract is properly designated as a fair

value hedge of a foreign currency firm commitment. The fair value of

the firm commitment is measured through reference to changes in the

forward rate.

$$ How would hedge accounting make a difference on each year$$s net

income? Prepare journal entries to account for the forward contract,

firm commitment, and import purchase.