Part A (Worth a total of 40 marks) There are TWO problems. You are required to answer ALL TWO in the answer booklets supplied.

Part A (Worth a total of 40 marks)

There are TWO  problems. You are required to answer ALL TWO in the answer booklets supplied.

Problem 1 (Worth 20 marks)

Platypus Ltd exports goods to Harlom Incorporated. All sales contracts are denominated in US dollars. Sales of US$5 million are made on 1 May 2014, FOB Sydney. The amount is due for payment by Harlom Incorporated on 1 September 2014. A sell-hedge contract for US$5 million is taken out on 1 June 2014 with The Bank. It matures on 1 September 2014. Platypus Ltd's reporting date is 30 June.

Required:

Assume the above hedge is a fair value hedge. Prepare journal entries for Platypus Ltd to account for the above transactions.

Problem 2 (Worth 20 marks)         

Ramikin Co is a fully owned subsidiary of Bobbin Ltd, an Australian company. Bobbin Ltd purchased all the issued capital of Ramikin Ltd on 1 July 2014. Ramikin Ltd is based in Canada. The following information is summarised from the foreign currency accounts of Ramikin Ltd for the period ended 30 June 2015.