Icebreaker Company (a U.S.-based company) purchases materials from a foreign supplier on December 1, 2020, with...
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Icebreaker Company (a U.S.-based company) purchases materials from a foreign supplier on December 1, 2020, with payment of 10,000 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 10,000 dinars on March 1, 2021. Relevant exchange rates for the dinar on various dates are as follows: Date December 1, 2020 December 31, 2020 March 1, 2021 Spot Rate $ 2.80 2.90 3.05 Forward Rate (to March 1, 2021) $ 2.875 3.000 N/A 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? Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Req A1 Req A2 to A4 Req B1 Req B2 to B3 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? (Do not round intermediate calculations. Negative amounts should be entered with a minus sign.) Show less A Impact on 2020 net income $ 28,250 2. a- Impact on 2021 net income 3. $ 250 X a- 4. Impact on net income over 2020 and 2021 $ 28,750 < Req A1 Req B1 > 1 No 12/01/2020 Date Cost of goods sold Accounts payable (dinars) General Journal Debit Credit 28,000 28,000 2 12/01/2020 No journal entry required 3 12/31/2020 Foreign exchange gain or loss Accounts payable (dinars) 1,000 1,000 4 12/31/2020 Forward contract Foreign exchange gain or loss 5 12/31/2020 No journal entry required 6 12/31/2020 7 03/01/2021 Foreign exchange gain or loss Other comprehensive income Foreign exchange gain or loss Accounts payable (dinars) 8 03/01/2021 Forward contract Foreign exchange gain or loss 9 03/01/2021 No journal entry required 10 03/01/2021 Accumulated other comprehensive income Foreign exchange gain or loss 11 03/01/2021 Foreign currency (dinars) Cash Forward contract >> > 1,250 1,250 12 03/01/2021 Accounts payable (dinars) Foreign currency (dinars) < Req A2 to A4 Req B2 to B3 > 250x 250x 1,500 1,500 500 500 500 500 30,500 28,750 1,750 30,500 30,500 Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Req A1 Req A2 to A4 Req B1 Req B2 to B3 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? (Do not round intermediate calculations. Negative amounts should be entered with a minus sign.) b- 2. Impact on 2020 net income S 28,250 Impact on 2021 net income 500X b- Impact on net income over 2020 and 2021 S 28,750 x 3. < Req B1 Req B2 to B3 > Icebreaker Company (a U.S.-based company) purchases materials from a foreign supplier on December 1, 2020, with payment of 10,000 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 10,000 dinars on March 1, 2021. Relevant exchange rates for the dinar on various dates are as follows: Date December 1, 2020 December 31, 2020 March 1, 2021 Spot Rate $ 2.80 2.90 3.05 Forward Rate (to March 1, 2021) $ 2.875 3.000 N/A 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? Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Req A1 Req A2 to A4 Req B1 Req B2 to B3 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? (Do not round intermediate calculations. Negative amounts should be entered with a minus sign.) Show less A Impact on 2020 net income $ 28,250 2. a- Impact on 2021 net income 3. $ 250 X a- 4. Impact on net income over 2020 and 2021 $ 28,750 < Req A1 Req B1 > 1 No 12/01/2020 Date Cost of goods sold Accounts payable (dinars) General Journal Debit Credit 28,000 28,000 2 12/01/2020 No journal entry required 3 12/31/2020 Foreign exchange gain or loss Accounts payable (dinars) 1,000 1,000 4 12/31/2020 Forward contract Foreign exchange gain or loss 5 12/31/2020 No journal entry required 6 12/31/2020 7 03/01/2021 Foreign exchange gain or loss Other comprehensive income Foreign exchange gain or loss Accounts payable (dinars) 8 03/01/2021 Forward contract Foreign exchange gain or loss 9 03/01/2021 No journal entry required 10 03/01/2021 Accumulated other comprehensive income Foreign exchange gain or loss 11 03/01/2021 Foreign currency (dinars) Cash Forward contract >> > 1,250 1,250 12 03/01/2021 Accounts payable (dinars) Foreign currency (dinars) < Req A2 to A4 Req B2 to B3 > 250x 250x 1,500 1,500 500 500 500 500 30,500 28,750 1,750 30,500 30,500 Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Req A1 Req A2 to A4 Req B1 Req B2 to B3 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? (Do not round intermediate calculations. Negative amounts should be entered with a minus sign.) b- 2. Impact on 2020 net income S 28,250 Impact on 2021 net income 500X b- Impact on net income over 2020 and 2021 S 28,750 x 3. < Req B1 Req B2 to B3 >
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Advanced Accounting
ISBN: 9781260247824
14th Edition
Authors: Joe Ben Hoyle, Thomas Schaefer, Timothy Doupnik
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