Icebreaker Company $($a U$.$S$.-$based company$)$ purchases materials from a foreign supplier on

December $1,2020,$ with payment of $16,000$ dinars to be made on March $1,2021.$ The materials are

consumed immediately and recognized as cost of goods sold at the date of purchase. On

December $1,2020,$ Icebreaker enters into a forward contract to purchase $16,000$ dinars on March $1,$

Relevant exchange rates for the dinar on various dates are as follows:

a$-1.$ Assuming that Icebreaker designates the forward contract as a cash flow hedge of a foreign

currency payable, prepare journal entries for the import purchase 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 payable, prepare journal entries for the import purchase and foreign currency forward

contract in U$.$S$.$ dollars.

b$-2.$ What is the impact on net income in $2020$ and in $2021?$

b$-3.$ What is the impact on net income over the two accounting periods?