Prepare the journal entries
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
REQUIRED:
(a) Prepare the
![Bistari Bakeries Bhd (BB) is the main producer of a variety of baked products in Malaysia. For
the past five years the demands for its products have increased tremendously. Currently it is the
market leader with 70% market share. BB has maintained a good risk management strategy in
its effort to continually dominate the baking industry. The management is very concermed about
the fluctuation of the price of the wheat as it is the risk that would affect both BB's net income
and financial position. Therefore, the management adopted a risk management policy, which is
to hedge the commodity price risk arising from its highly probable forecast purchase of wheat
up to 18 months in advance.
On 1 May 2019, BB entered into a net-settled wheat forward contract with a commodity broker
to purchase 5,000 tounes, of wheat with a maturity of 30 September 2020. This was the hedging
for the purchase of 5,000 tounes of wheat made on 30 September 2020. BB was able to
demonstrate that it met all the requirements to apply hedge accounting. This hedge was
classified as cash flow hedge.
Wheat forward prices for a contract maturing 30 September 2020 at various dates during the
hedge were as follows:
1 May
2019
RM1,000
30 June
2019
RM930
31 Dec
2019
RM900
30 June
2020
RM1,150
30 Sept
2020
RM1,210
Wheat
forward
price/tonne
On 30 September 2020, BB purchased 5,000 tonnes of wheat at spot price of RM1,210 per
tonne. The purchase was settled immediately. Annual interest rate is 12%. BB prepares
financial statements on 30 June and 31 December.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F04e1183c-72b4-44b7-ac13-b292c356863e%2Fdaa3e0e6-1eb4-455c-8066-85a3c21bbee1%2Fq1uore_processed.jpeg&w=3840&q=75)
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