Melbourne Ltd manufactures electric skateboards. On 4 June 2022 Melbourne Ltd enters into a non-cancellable purchase commitment with Miami Ltd for the supply of wheels, with the wheels to be shipped on 30 June 2022. The total contract price was US$3 000 000 and the full amount was due for payment on 30 August 2022.

Because of concerns about movements in foreign exchange rates, on 4 June 2022 Melbourne Ltd entered into a forward rate contract on US dollars with a foreign exchange broker so as to receive US$3 000 000 on 30 August 2022 at a forward rate of A$1.00 = US$0.78. Melbourne Ltd prepares monthly financial statements and it elects to treat the hedge as a cash flow hedge.

Other information

The respective spot rates are provided below. The forward rates offered on particular dates, for delivery of US dollars on 30 August 2022, are also provided.

Provide the journal entries to account for the ‘hedged item’ and the ‘hedging instrument’ for the months ending 30 June, 31 July and 30 August 2022.

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Forward rates for 30 August 2022 delivery of US$ Date Spot rate 4 June 2022 30 June 2022 31 July 2022 A$1.00 US$0.80 A$1.00 = US$0.78 A$1.00 = US$0.78 A$1.00 = US$0.76 A$1.00 = US$0.75 A$1.00 = US$0.74 30 August 2022 A$1.00 = US$0.72 A$1.00 = US$0.72