Brandlin company of anaheim, california, purchases materials from a foreign supplier on december 1, 2017, with payment of 22,000 korunas to be made on march 1, 2018. the materials are consumed immediately and recognized as cost of goods sold at the date of purchase. on december 1, 2017, brandlin enters into a forward contract to purchase 22,000 korunas on march 1, 2018. relevant exchange rates for the koruna on various dates are as follows:

forward rate (to march 1, 2018) 4.075 spot rate date december 1, 2017 december 31, 2017 march 1, 2018 $ 4.00 4.200 4.10 4.25 niabrandlin’s incremental borrowing rate is 12 percent. the present value factor for two months at an annual interest rate of 12 percent (1 percent per month) is 0.9803. brandlin must close its books and prepare financial statements at december 31.

a-1. assuming that brandlin designates the forward contract as a cash flow hedge of a foreign currency payable and recognizes any premium or discount using the straight-line method, prepare journal entries for these transactions in u. s. dollars.