Foreign Currency Transactions Suggested Time: You should spend about 30 minutes on this section. On 1 March 2020, Sunrise Ltd, a New Zealand entity, purchases AUD 1 200 000 of inventory from Suresh Incorporated, an AUD entity. The amount is payable on 1 August 2020. A forward exchange contract for the delivery of AUD 1 200 000 million is taken out with Bred Bank on 1 May 2020. Bred Bank requires delivery of the foreign currency on 1 August 2020. Sunrise Limited has a 30 June end of reporting period. Additional information The relevant exchange rates are as follows: Spot Forward Date rate rate 1 March 2020 0.40 1 May 2020 0.37 0.35 30 June 2020 0.36 0.34 1 August 2020 0.32 0.32

REQUIRED: Prepare the journal entries for Sunrise Ltd to account for the hedge. You may use the template below for hedging. Date Spot rate Forward rate Receivable on forward contract Payable on forward contract Fair value of forward contract Gain/loss on forward contract 1 March 2020 0.40 1 May 2020 0.37 0.35 30 June 2020 0.36 0.34 1 August 2020 0.32 0.32