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Must thumb up if correct On1 June 2021, ABC Ltd entered into a non-cancelable purchase commitment with a supplier, to purchase an inventory of cardboard
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On1 June 2021, ABC Ltd entered into a non-cancelable purchase commitment with a supplier, to purchase an inventory of cardboard boxes for US$100,000 on 1 August. The purchase is on credit which is payable on 1 Sept 2021. The CFO was concerned about the impact of the adverse exchange rate movements. ABC Lid entered into a forward rate agreement with the Commonwealth Bank on 1 June 2021 to purchase US$100.000 on 1 Sept 2021. ABC Lid's reporting date is 30 June. The following exchange rates are applicable: 2021 Spot rate Forward rate for delivery of $100,000 on 1 Sept 1 June A$1.00-US80.82 A$1.00-US50.78 30 June A$1.00 US$0.00 A$100-U850.75 1 August A31.00 US$0.83 A$1.00 US$0.70 1 Sept A$1.00U590.86 A$1.00-U590.86 ABC Company has designed the lodging arrangement as a cash now hedge, which qualities for hedge accounting in accordance with Asa o Financial Instruments'. The hedge is highly effective, On1 June 2021, ABC Ltd entered into a non-cancelable purchase commitment with a supplier, to purchase an inventory of cardboard boxes for US$100,000 on 1 August. The purchase is on credit which is payable on 1 Sept 2021. The CFO was concerned about the impact of the adverse exchange rate movements. ABC Lid entered into a forward rate agreement with the Commonwealth Bank on 1 June 2021 to purchase US$100.000 on 1 Sept 2021. ABC Lid's reporting date is 30 June. The following exchange rates are applicable: 2021 Spot rate Forward rate for delivery of $100,000 on 1 Sept 1 June A$1.00-US80.82 A$1.00-US50.78 30 June A$1.00 US$0.00 A$100-U850.75 1 August A31.00 US$0.83 A$1.00 US$0.70 1 Sept A$1.00U590.86 A$1.00-U590.86 ABC Company has designed the lodging arrangement as a cash now hedge, which qualities for hedge accounting in accordance with Asa o Financial Instruments'. The hedge is highly effective Step by Step Solution
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