On 1 March 2014 A Limited entered into a 12-month forward contract to hedge the highly probable importation of a machine from an American company.

A firm order (firm commitment) was placed on 30 June 2014 to the value of $100 000. The machine was shipped on the 15 July 2014 (delivery at terminal) and arrived at Cape Town harbour on 31 August 2014. The machine was available for use that same day but only operated from 1 December 2014.

All machines used in the manufacturing process are depreciated on the straight-line basis at 10% per annum to a nil residual value.

To avoid interest being charged on the outstanding balance, the creditor was paid on 1 February 2015.

All hedges are accounted for as fair value hedges where the option is available (from the date of the firm commitment – 30 June 2014). It is company policy to use the basis adjustment for all hedges.

REQUIRED:

Journalise all aspects of the acquisition and subsequent measurement of the plant for the years ending 31 December 2014 and 2015.

Journal narrations are not required.

Details of exchange rates are as follows (R= $1): Spot 1 March 2014 30 June 2014 31 August 2014 31 December 2014 1 February 2015 28 February 2015 13,50 14,00 13,60 14,50 14,40 14,60 12 months FEC 13,92 14,43 14.04 14,95 14,86 15,07 8 months FEC 13,82 14,33 13,94 14,85 14,76 14,97 6 months FEC 13,72 14,23 13,84 14,75 14,66 14,87 2 months FEC 13,62 14,13 13,74 14,65 14,56 14,77