REQUIRED:(a) Prepare the journal entries to record the transactions over the hedging period from 2019 to 2020. Show all workings. Bistari Bakeries Bhd (BB) is the main producer of a variety of baked products in Malaysia. Forthe past five years the demands for its products have increased tremendously. Currently it is themarket leader with 70% market share. BB has maintained a good risk management strategy inits effort to continually dominate the baking industry. The management is very concermed aboutthe fluctuation of the price of the wheat as it is the risk that would affect both BB's net incomeand financial position. Therefore, the management adopted a risk management policy, which isto hedge the commodity price risk arising from its highly probable forecast purchase of wheatup to 18 months in advance.On 1 May 2019, BB entered into a net-settled wheat forward contract with a commodity brokerto purchase 5,000 tounes, of wheat with a maturity of 30 September 2020. This was the hedgingfor the purchase of 5,000 tounes of wheat made on 30 September 2020. BB was able todemonstrate that it met all the requirements to apply hedge accounting. This hedge wasclassified as cash flow hedge.Wheat forward prices for a contract maturing 30 September 2020 at various dates during thehedge were as follows:1 May2019RM1,00030 June2019RM93031 Dec2019RM90030 June2020RM1,15030 Sept2020RM1,210Wheatforwardprice/tonneOn 30 September 2020, BB purchased 5,000 tonnes of wheat at spot price of RM1,210 pertonne. The purchase was settled immediately. Annual interest rate is 12%. BB preparesfinancial statements on 30 June and 31 December.

Other Comprehensive Income (OCI) is the part of comprehensive income statement in which the…

Answered: Prepare the journal entries

Business

Accounting

Prepare the journal entries

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter10: Decentralization: Responsibility Accounting, Performance Evaluation, And Transfer Pricing

Section: Chapter Questions

Problem 34P

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