Question 15

On 1 July 2020, ABC Lid purchased an inventory of cardboard boxes for US$100,000 on credit which is payable on 1 Oct 2020. The CFO was concerned about the impact of the adverse exchange rate movements on the fair value of the payable arising from the purchase of inventory. ABC Lid entered into a forward rate agreement with the Commonwealth Bank on 1 July 2020 to purchase US$100,000 on 1 Oct 2020. ABC Ltd's reporting date is 30 June. The following exchange rates are applicable: Spot rate Forward rate for delivery of $100 000 on 1 Oct 2020 30 June 2020 A$1.00=US$0.82 A$1.00=US$0.78 1 July 2020 A$1.00=US$0.78 A$1.00=US$0.75 1 Oct 2020 A$1.00=US$0.86 A$1.00=US$0.86 ABC Company has designed the hedging arrangement as a fair value hedge, which qualifies for hedge accounting in accordance with AASB 9 'Financial Instruments'. It is 100% effective. REQUIRED: Prepare the general journal entries to record these transactions at various dates in ABC Ltd's books in accordance with the requirements of AASB 9 'Financial Instruments. Show all calculations on measuring fair values and changes in fair values of the hedging instrument and the hedged item at various dates. No narration is required. Round answers to the nearest Australian dollar