Question: Forward contract with cash flow hedging LO10 On 1 January 2020, Toby Ltd, an Australian company that has A$ as its functional currency,

Forward contract with cash flow hedging   LO10 On 1 January 2020, Toby Ltd, an Australian company that has A$ as its functional currency, enters into a forward exchange contract to sell €300 000 on 31 August 2020. The forward contract is designated as a hedge for a sales transaction of €300 000 that Toby Ltd expects to have with a German customer on 31 August 2020. The sales transaction is highly probable based on past experience. Assume a discount rate of 0% for fair value calculations. Relevant exchange rates are as follows. Spot rate Forward rate (for 31/8/2020) 1 January 2020 €1 = A$1.27 €1 = A$1.32 30 June 2020 €1 = A$1.30 €1 = A$1.35 31 August 2020 €1 = A$1.36 €1 = A$1.36 Required Prepare the necessary entries for Toby Ltd up until and including 31 August 2020 in accordance with AASB 121/IAS 21.

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