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Accounting problem Task Twov On 1 August 2018 Paradise Ltd, an Australia entity, places an order for US$3 million of inventory with Blue Ltd, a
Accounting problem
Task Twov On 1 August 2018 Paradise Ltd, an Australia entity, places an order for US$3 million of inventory with Blue Ltd, a US supplier. The goods will be purchased FOB New York. A decision is made to take outa foreign exchange forward-rate contract for US$3 million on 1 August 2018 with the Bank in which the Bank agrees to supply Paradise Ltd with US$3 million on 1 December 2018. The goods are shipped on 1 October 2018 and are paid for on 1 December 2018. Additional information The relevant exchange rates are as follows: Datep 1 August 2018* 1 October 2018. 30 October 2018 1 December 2018 Spot rate 0.75 0.73 0.70 0.72 Forward rate 0.73 0.70 0.67p 0.72 Assume that the hedging arrangement satisfies the requirements for hedge accounting as stipulated in AASB 9 'Financial Instruments, and the management of Paradise Ltd adopts Cash flow hedge accounting. Prepare a table showing Gains/losses on the hedging instrument (the forward rate contract) and also provide necessary journal entries for Paradise LtdStep by Step Solution
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