On 1 March 2022 Kanga Ltd, an Australian entity, places an order for UK£1.5 million of inventory with Ferrett plc, a UK supplier. The goods will be purchased FOB Liverpool. The goods are shipped on 1 June 2022, at which point they are considered to be in the control of Kanga Ltd, and are paid for on 1 August 2022. The organisation has a 30 June year end.

REQUIRED

Provide the necessary journal entries for Kanga Ltd to account for the purchase transaction with Ferrett plc. Also, would you recommend that the organisation consider entering a hedging arrangement with respect to this transaction?

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Additional information Spot rate Date 1 March 2022 A$1.00 = £0.45 1 June 2022 A$1.00 = £0.43 30 June 2022 A$1.00 = £0.39 1 August 2022 A$1.00 = £0.41