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Icebreaker Company (a U.S.-based company) sells parts to a foreign customer on December 1, 2020, with payment of 14,000 dinars to be received on March 1, 2021. Icebreaker enters into a forward contract on December 1, 2020, to sell 14,000 dinars on March 1, 2021. 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 December 1, 2020 December 31, 2020 March 1, 2021 Spot Rate $ 3.20 3.30 3.45 Forward Rate (to March 1, 2021) $ 3.275 3.400 N/A Icebreaker must close its books and prepare financial statements at December 31. 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 2020 net income? a-3. What is the impact on 2021 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 2020 net income? b-3. What is the impact on 2021 net income? b-4. What is the impact on net income over the two accounting periods? No Date General Journal Debit Credit 1 12/01/2020 Accounts receivable (dinars) 44,800 Sales 44,800 2 12/01/2020 No journal entry required 3 12/31/2020 1,400 Accounts receivable (dinars) Foreign Exchange Gain or Loss 1,400 4 12/31/2020 Foreign Exchange Gain or Loss 1,750 Forward contract 1,750 5 12/31/2020 No journal entry required 6 12/31/2020 700 Other comprehensive income Foreign Exchange Gain or Loss 700 7 03/01/2021 2,100 Accounts receivable (dinars) Foreign Exchange Gain or Loss 2,100 8 03/01/2021 No journal entry required 8 03/01/2021 No journal entry required 9 03/01/2021 700 Foreign Exchange Gain or Loss Forward contract 700 10 03/01/2021 700 Foreign Exchange Gain or Loss Accumulated other comprehensive income 700 11 03/01/2021 48,300 Foreign currency (dinars) Accounts receivable (dinars) 48,300 12 03/01/2021 Cash 45,850 Forward contract 2,450 Foreign currency (dinars) 48,300 Complete this question by entering your answers in the tabs below. Req A1 Req A2 to A4 Req B1 Req B2 to B4 b-2. What is the impact on 2020 net income? b-3. What is the impact on 2021 net income? b-4. What is the impact on net income over the two accounting periods? (Do not round intermediate calculations. Negative amounts should be entered with a minus sign.) Show les Impact on 2020 net income b- 2. b- 3. b- 4. Impact on 2021 net income Impact on net income over 2020 and 2021 Icebreaker Company (a U.S.-based company) sells parts to a foreign customer on December 1, 2020, with payment of 14,000 dinars to be received on March 1, 2021. Icebreaker enters into a forward contract on December 1, 2020, to sell 14,000 dinars on March 1, 2021. 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 December 1, 2020 December 31, 2020 March 1, 2021 Spot Rate $ 3.20 3.30 3.45 Forward Rate (to March 1, 2021) $ 3.275 3.400 N/A Icebreaker must close its books and prepare financial statements at December 31. 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 2020 net income? a-3. What is the impact on 2021 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 2020 net income? b-3. What is the impact on 2021 net income? b-4. What is the impact on net income over the two accounting periods? No Date General Journal Debit Credit 1 12/01/2020 Accounts receivable (dinars) 44,800 Sales 44,800 2 12/01/2020 No journal entry required 3 12/31/2020 1,400 Accounts receivable (dinars) Foreign Exchange Gain or Loss 1,400 4 12/31/2020 Foreign Exchange Gain or Loss 1,750 Forward contract 1,750 5 12/31/2020 No journal entry required 6 12/31/2020 700 Other comprehensive income Foreign Exchange Gain or Loss 700 7 03/01/2021 2,100 Accounts receivable (dinars) Foreign Exchange Gain or Loss 2,100 8 03/01/2021 No journal entry required 8 03/01/2021 No journal entry required 9 03/01/2021 700 Foreign Exchange Gain or Loss Forward contract 700 10 03/01/2021 700 Foreign Exchange Gain or Loss Accumulated other comprehensive income 700 11 03/01/2021 48,300 Foreign currency (dinars) Accounts receivable (dinars) 48,300 12 03/01/2021 Cash 45,850 Forward contract 2,450 Foreign currency (dinars) 48,300 Complete this question by entering your answers in the tabs below. Req A1 Req A2 to A4 Req B1 Req B2 to B4 b-2. What is the impact on 2020 net income? b-3. What is the impact on 2021 net income? b-4. What is the impact on net income over the two accounting periods? (Do not round intermediate calculations. Negative amounts should be entered with a minus sign.) Show les Impact on 2020 net income b- 2. b- 3. b- 4. Impact on 2021 net income Impact on net income over 2020 and 2021

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