On November 1, 20X1, Bernard Company (a U.S.-based company) sold merchandise to a foreign customer for 120,000 FCUs with payment to be received on April 30, 20X2. At the date of sale, Bernard entered into a six-month forward contract to sell 120,000 FCUs. The forward points on the forward contract are excluded in assessing hedge effectiveness and are amortized to net income using a straight-line method on a monthly basis. The company properly designates the forward contract as a fair value hedge of a foreign currency receivable. The following exchange rates apply:
Date
Spot Rate
Forward Rate
(to April 30, 20X2)
November 1, 20X1
$
0.22
$
0.21
December 31, 20X1
0.20
0.18
April 30, 20X2
0.19
N/A
What is the impact on net income in 2021 due to the sale transaction from year 20X1 and forward contract?
Group of answer choices
Increase net income by $26,000.
Increase net income by $26,800.
Decrease net income by $1,200.
Increase net income by $26,400.