MNA is a Canadian-based pharmaceutical company that develops generic over-the-counter medicines.
The company is publicly traded. The company sells its products to pharmacies across North America, and as a result has a significant number of U.S.-denominated accounts receivable. MNA sold US$220,000 in goods to a U.S. customer on 15 November. The receivable is due in 60 days.
The exchange rate at the time of the sale was US$1 = Cdn$1.25. On the same day that the goods are sold, assume that MNA enters into an agreement with the bank whereby the bank will pay a forward price of $1.25 on US$220,000.

Required:
1. Identify and explain what type of derivative instrument this is. Explain how the risk relating to the US$ receivable has been hedged.
2. Assuming that the company did not enter into the agreement with the bank, explain the accounting if:
a. The exchange rate changes to US$1 = Cdn$1.30 on the date the receivable is settled. 

b. The exchange rate changes to US$1 = Cdn$1.20 on the date the receivable is settled.