prepare table showing gain/loss on the hedging instrument and provide journal entries for paradise ltd. to account for the hedge. On 1 April 2021 Paradise Ltd, an Australia entity, places an order for US$3.5 million of inventory withBlue Ltd, a US supplier. The goods will be purchased FOB New York. A decision is made to take out aforeign exchange forward-rate contract for US$3.5 million on 1 April 2021 with the Bank in which theBank agrees to supply Paradise Ltd with US$3.5 million on 1 August 2021. The goods are shipped on1 June 2021 and are paid for on 1 August 2021.Relevant exchange rates are as followsSpot rateA$1= US$0.92A$1= US$0.89A$1= US$0.85A$1= US$0.88DateForward rate1 April 20211 June 202130 June 2021A$1= US$0.89A$1= US$0.86A$1= US$0.82A$1= US$0.881 August 2021Assume that the hedging arrangement satisfies the requirements for hedge accounting as stipulatedin AASB 9 'Financial Instruments', and the management of Paradise Ltd adopts Cash flow hedgeaccounting.Required:(a) Prepare a table showing Gains/losses on the hedging instrument.(b) Provide the journal entries for Paradise Ltd to account for the hedge [Narrations are notrequired].

Answered: On 1 April 2021 Paradise Ltd, an…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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