question archive This question has two parts, and you are required to answer both parts (i
This question has two parts, and you are required to answer both parts (i
Subject:BusinessPrice: Bought3
This question has two parts, and you are required to answer both parts (i.e. A & B). PART A (4 marks): On 1 August 2020, Calanthe Ltd entered into a purchase commitment with a US supplier to buy US $50 000 worth of raw materials and the full amount is due on 1 November 2020. On 30 September 2020, the control of the goods will be transferred to Calanthe Ltd upon shipping. Concerned about adverse exchange rate fluctuations, on 1 August 2020 Calanthe Ltd also entered into a forward rate agreement with the Greedy Bank for delivery of US $50 000 on 1 November 2020. The following exchange rate information is available: Spot rate: Forward rate for delivery of USD 50 000 on 1 November: 1 August 2020 30 September 2020 1 November 2020 A$1.00 = US$0.52 A$1.00 = US$0.56 A$1.00 = US$0.61 A$1.00 = US$0.50 A$1.00 = US$0.55 A$1.00 = US$0.61 Calanthe Ltd has designated the hedging arrangement as a cash flow hedge, which qualifies for hedge accounting in accordance with AASB 9 'Financial Instruments'. It is 100% effective. The end of the reporting period for Calanthe Ltd is 30 September. REQUIRED: Explain in details whether Calanthe Ltd benefits financially from these transactions. Show all calculations on measuring fair values and changes in fair values of the hedging instrument and the hedged item at various dates. Provide any necessary explanation to support your answer. Round answers to the nearest Australian dollar.
