On 1 March 2021 Kellogs Ltd, an Australian entity places an order for UK £1.5 million of inventory with Forrest plc, a UK supplier. The goods will be purchased FOB Liverpool. The goods are shipped on 1 June 2021, at which point they are considered to be in the control of Kellogs Ltd and are paid for on 1 August 2021. The organisation has a 30 June year end.

Additional information

Date                            Spot Rate

1 March 2021              A$1.00 = £0.45

1 June 2021                 A$1.00 =£0.43

30 June 2021               A$1.00 = £0.39

1 August 2021            A$1.00 = £0.41

Required:

Provide the necessary journal entries for Kellogs Ltd to account for the purchase transaction with Forrest plc (ignore narrations).

1. Would you recommend that the organisation consider entering a hedging arrangement with respect to this transaction (discuss the net gain/loss and the type of hedging arrangement you would recommend if you support hedging in this case)?

Answer rating: 100% (QA)

a Kellogs Ltd Journal Entries Date Particulars AmountA Dr AmountA Cr 1 June Purchase AC Dr 34883... View the full answer