QUESTION 2 (48 marks) You are a partner at an auditing firm and specialise in resolving tax matters. Two of your clients need your assistance regarding specific foreign exchange transactions. Client 1 On 1 October 2021 Diamond Ltd., a South African company, purchased 1 500 crates of trading stock from an American supplier at a cost of $25 per crate. Under the purchase contract, Diamond Ltd. was given three months in which to settle the entire debt. To hedge the settlement of this debt, Diamond Ltd. took out a three-month forward exchange contract on 1 October 2021. Diamond Ltd re-negotiated its credit facilities with its supplier who agreed to a further three-month credit (a total of six months) with settlement of the debt now being agreed as being on 31 March 2022. To hedge this later settlement date, Diamond Ltd. took out a second three-month forward exchange contract on 1 January 2022. Diamond Ltd has a February year-end. The relevant ruling rates of exchange were as follows: Date Spot rate Forward rate and period 1 October 2021 $1 R17,30 $1 R17,45 (three-month contract) 31 December 2021 | $1 = R17,25 $1 = R17,79 1 January 2022 $1 R17,60 $1 = R17,80 (three-month contract) 28 February 2022 31 March 2022 $1 = R17,75 $1 = R17,95 (market-related forward rate for a two-month contract) $1 = R18,00 "The "average exchange rate" for a year of assessment that ended on 28 February 2022 was $1 = R17,50. Client 2 Berry (Pty) Ltd. is an Australian subsidiary of Fruit Ltd., a South African company. The Group of companies specialises in the production of healthy food products. Due to the material increase in demand for healthier food options Berry (Pty) Ltd. has decided to expand its production department. To fund this expansion, Fruit Ltd. agreed to lend