Brisbane Ltd manufactures cars. On 15 June 2022 Brisbane Ltd enters into a non-cancellable purchase commitment with LA Ltd for the supply of engines, with those engines to be shipped on 30 June 2022, at which time control of the assets will be transferred to Brisbane Ltd. The total contract price was US$4 000 000 and the full amount was due for payment on 30 August 2022.

Because of concerns about movements in foreign exchange rates, on 15 June 2022 Brisbane Ltd entered into a forward rate contract on US dollars with a foreign exchange broker so as to receive US$4 000 000 on 30 August 2022 at a forward rate of A$1.00 = US$0.80. Brisbane Ltd elects to treat the hedge as a cash flow hedge and the hedge arrangement satisfies the criteria within AASB 9 for hedge accounting.Page 596
Other information The respective spot rates are provided below. The forward rates offered on particular dates, for delivery of US dollars on 30 August 2022, are also provided.

REQUIRED

Provide the journal entries to account for the ‘hedged item’ and the ‘hedging instrument’. The financial year end is 30 June 2022.

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Forward rates for 30 August delivery of US$ Date Spot rate 15 June 2022 A$1.00 = US$0.78 A$1.00 = US$0.75 30 June 2022 A$1.00 = US$0.76 A$1.00 US$0.73 30 August 2022 A$1.00 = US$0.71 A$1.00 = US$0.71