Purchase of inventories paid in instalments; borrowing with hedged interest commitment; purchase of inventories with hedged liability to supplier    LO3, 7, 10 You are the finance director of Gripweed Ltd, an Australian company listed on the ASX. The company is an importer of goods from overseas markets. The company’s financial year ends on 30 June 2020. The company entered the following transactions during the year.

(a) Gripweed Ltd purchased inventories from a Hong Kong supplier for HK$300 000. The title to the goods passes to the company on delivery. The payment for the inventories is due in equal instalments. The following exchange rates are applicable. 22 Apr. 2020 Date of order for inventories A$1 = HK$8.00 30 Apr. 2020 Date of delivery for inventories A$1 = HK$8.50 31 May 2020 1st payment of HK$100 000 A$1 = HK$8.56 30 June 2020 2nd payment of HK$100 000 A$1 = HK$8.59 31 July 2020 3rd payment of HK$100 000 A$1 = HK$8.94

(b) Gripweed Ltd purchased land in Japan on 1 July 2019 for ¥50 000 000. The land is subsequently revalued on 30 June 2020 to its fair value of ¥80 000 000. The following exchange rates are applicable. 1 July 2019 Date of acquisition of land A$1 = ¥160 30 June 2020 Date of revaluation of land A$1 = ¥245

(c) Gripweed Ltd arranged interest-only borrowings on 1 January 2020 for US$20 000 000. The borrowings have a 10-year term and interest is paid half-yearly at the rate of 7.6% p.a. Gripweed Ltd took out a 6-month forward exchange contract on 1 January 2020 as a hedge against the initial interest payment due. The following exchange rates are applicable. Spot rate Forward rate for 30/6/2020 1 Jan. 2020 A$1 = US$0.80 A$1 = US$0.75 30 June 2020 A$1 = US$0.65 A$1 = US$0.65

(d) Gripweed Ltd purchases inventories on 1 May 2020 from an English supplier for £350 000. On the same date, Gripweed enters a 3-month forward exchange contract to buy £350 000 to hedge its liability to the supplier. On 31 July 2020, the supplier is paid and the forward contract is settled. The following exchange rates are applicable. Spot rate Forward rate for 31/7/2020 1 May 2020 A$1 = £0.67 A$1 = £0.65 30 June 2020 A$1 = £0.55 A$1 = £0.50 31 July 2020 A$1 = £0.40 A$1 = £0.40

(e) Assume the same facts as part

(d) except that the date of the purchase of inventories is 31 July 2020 and at 1 May 2020 it is a highly probable forecast transaction. Required Prepare the entries of Gripweed Ltd to account for its foreign currency transactions in accordance with AASB 121/IAS 21. Assume a 0% discount rate for fair value calculations. Explain the techniques applied in respect of each transaction.