Icebreaker Company (a U.S.-based company) purchases materials from a foreign supplier on December 1, 2020, with payment of 18,000 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 18,000 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 $ 3.60 3.70 3.85 Forward Rate (to March 1, 2021) $ 3.675 3.800 N/A
Icebreaker Company (a U.S.-based company) purchases materials from a foreign supplier on December 1, 2020, with payment of 18,000 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 18,000 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 $ 3.60 3.70 3.85 Forward Rate (to March 1, 2021) $ 3.675 3.800 N/A
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Icebreaker Company (a U.S.-based company) purchases materials from a foreign supplier on December 1, 2020, with payment of
18,000 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 18,000 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.
$ 3.60
3.70
3.85
Forward Rate
(to March 1, 2021)
$ 3.675
3.800
N/A
Transcribed Image Text:a-
2.
a-
3.
Req A1
a-
4.
Req A2 to A4
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.)
Req B1
Req B2 to B3
Impact on 2020 net income
Impact on 2021 net income
Impact on net income over 2020 and 2021
Show less A
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