An Italian Company Plans to Purchase Merchandise from a Company

Essay

An Italian company plans to purchase merchandise from a company in Singapore at the end of September, payment of S$1,000,000 due in Singapore dollars. On May 15, the Italian company enters a forward purchase contract for S$1,000,000 to be delivered on September 30. The contract hedges a forecasted purchase of a nonfinancial asset. The forward is closed and the merchandise purchased on September 30. The merchandise is sold by the Italian company in November. The Italian company follows IFRS and has a June 30 year-end. Following is information on exchange rates (€/S$):
$$\begin{array} { | l | c | c | } \hline & \text { Spot Rate } & \begin{array} { c } \text { Forward Rate for } \\\text { September 30 Delivery }\end{array} \\\hline \text { May 15 } & € 0.617 & € 0.619 \\\hline \text { June 30 } & 0.625 & 0.624 \\\hline \text { September 30 } & 0.621 & 0.621 \\\hline\end{array}$$ Required
Prepare the journal entries to record the following events:
a. June 30 adjusting entry
b. September 30 adjusting entries and transactions
c. Entry to recognize cost of goods sold in November