On 1 May 2020, Winton Ltd, an Australian entity, places an order for US$300,000 of inventory with Gatsby Inc, a US supplier. On the same date, Winton Ltd enters into a forward exchange contract with the bank to buy US$300,000, to be settled on 31 July 2020. The goods are shipped FOB New York on 1 June 2020 and are paid for on 31 July 2020. Winton Ltd has a reporting date of 30 June. The following exchange rates are applicable. Spot rate Forward rate for 31/7/20 1 May 2020 A$1 = 0.73 USD A$1 = 0.71 USD 1 June 2020 A$1 = 0.77 USD A$1 = 0.74 USD 30 June 2020 A$1 = 0.72 USD A$1 = 0.70 USD 31 July 2020 A$1 = 0.68 USD A$1 = 0.68 USD Question 4(a) (4 marks) Required: Complete the table below showing the movement and the change in value of the hedged item. A B 1 Question 4(b) (6 marks) Required: Complete the table showing the movement and the change in value of the hedging instrument. S' to Question 4(c) (10 marks) Required: Prepare the journal entries for Winton Ltd to reflect the above transactions. AA BI ili rum 2 s's sto Question 4(d) (4 Marks) Required: Explain the following terms 'functional currency' and 'presentation currency'. What factors would help an entity determine the functional currency? BI !!! 45 III H On 1 May 2020, Winton Ltd, an Australian entity, places an order for US$300,000 of inventory with Gatsby Inc, a US supplier. On the same date, Winton Ltd enters into a forward exchange contract with the bank to buy US$300,000, to be settled on 31 July 2020. The goods are shipped FOB New York on 1 June 2020 and are paid for on 31 July 2020. Winton Ltd has a reporting date of 30 June. The following exchange rates are applicable. Spot rate Forward rate for 31/7/20 1 May 2020 A$1 = 0.73 USD A$1 = 0.71 USD 1 June 2020 A$1 = 0.77 USD A$1 = 0.74 USD 30 June 2020 A$1 = 0.72 USD A$1 = 0.70 USD 31 July 2020 A$1 = 0.68 USD A$1 = 0.68 USD Question 4(a) (4 marks) Required: Complete the table below showing the movement and the change in value of the hedged item. A B 1 Question 4(b) (6 marks) Required: Complete the table showing the movement and the change in value of the hedging instrument. S' to Question 4(c) (10 marks) Required: Prepare the journal entries for Winton Ltd to reflect the above transactions. AA BI ili rum 2 s's sto Question 4(d) (4 Marks) Required: Explain the following terms 'functional currency' and 'presentation currency'. What factors would help an entity determine the functional currency? BI !!! 45 III H
