Week 3 Self-study Questions Ch8&17.docx

Week 3 Self-study Questions Ch8&17.docx - Self-study...

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Self-study Questions Foreign Currency Tranactions Question 8.1 Translation of various foreign currency transactions and balances On 1 June 2017, Laurie Ltd entered into various transactions in NZ$ when the exchange rate was A$1.00 = NZ$1.40. Any assets arising from the NZ$ transactions are still on hand and any liabilities remain unsettled. On 30 June 2017, the exchange rate is A$1.00 = NZ$1.20. Translate each of following items for initial and subsequent measurement as appropriate: (a) Sale revenue and trade receivable of NZ$15 000 Date of transaction 1.6.17 Reporting date 30.6.17 Record the sales at spot rate Trade receivable $N.Z.15 000 1.4 = $A10 714 Restate the monetary item to closing rate Trade receivable $N.Z.15 000 1.2 = $A12 500 Exchange gain of $A1 786 Journal entries 1.6.17 30.6.17 Trade receivables Sales Trade receivables Foreign exchange gain Dr Cr Dr Cr 10 714 1 786 10 714 1 786
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(b) Inventory and trade payable of NZ$20 000 Date of transaction 1.6.17 Reporting date 30.6.17 Record inventory purchase at spot rate Trade payable $N.Z.20 000 1.4 = $ A14 286 Restate the monetary item to closing rate Trade payable $N.Z.20 000 1.2 = $A16 667 Exchange loss of $A2 381 Journal entries 1.6.17 30.6.17 Inventory Trade creditors Foreign exchange loss Trade creditors Dr Cr Dr Cr 14 286 2 381 14 286 2 381 (c) Plant NZ $30 000 Date of transaction 1.6.17 Reporting date 30.6.17 Record acquisition at spot rate Plant $N.Z.30 000 1.4 = $A21 429 Plant at cost is a non-monetary item that is NOT restated. Journal entry 1.6.17 Plant Cash Dr Cr 21 429 21 429
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(d) Interest free borrowings of NZ$100 000. Date of transaction 1.6.17 Reporting date 30.6.17 Record the borrowings at spot rate Borrowings $N.Z.100 000 1.4 = $A71 429 Restate the monetary item to closing rate Borrowings $N.Z..100 000 1.2 =$A83 333 Exchange loss of $A11 904 Journal entries 1.6.17 30.6.17 Cash Borrowings Foreign exchange loss Borrowings Dr Cr Dr Cr 71 429 11 904 71 429 11 904 3
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Question 8.2 Translation of various foreign currency transactions and balances Know Your Product Ltd is an Australian company with a functional currency of A$. The company has entered into a number of transactions denominated in US$ during the year ended 30 June 2017. If the closing exchange rate is A$1.00 = US$ 0.77, then determine the translated amount that will be included in the financial statements for each of the following balances: (a) Land at cost US$400 0000 acquired on 1 February 2017 when the exchange rate is A$1.00 = US$0.67. Date of transaction 1.2.17 Reporting date 30.6.17 Record acquisition at spot rate Land $U.S.400 000 0.67 = $A597 015 Land at cost is a non-monetary item that is NOT restated. Journal entry 1.2.17 Land Cash Dr Cr 597 015 597 015 (b) Land revalued to US$600 000 on 30 June 2017 that had cost US$400 000 on 1 February 2017 when the exchange rate was A$1.00 = US$0.67. Date of transaction 1.2.17 Reporting date 30.6.17 Record acquisition at spot rate Land $U.S.400 000 0.67 = $A597 015 Land restated to fair value at spot rate Land $U.S.600 000 0.77 = $A779 221 Gain on revaluation of $A182 206 Journal entries
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1.2.17 30.6.17 Land Cash Land Gain on revaluation (OCI) Dr Cr Dr Cr 597 015 182 206 597 015 182 206 5
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(c) Credit sale of US$ 80 000 on 12 March 2017 when the exchange rate is A$1.00 = US$ 0.69. Received cash from debtor of US$ 40 000 on 30 June 2017.
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