Tutorial 9 Answers

Tutorial 9 Answers - Tutorial 9 Answers 1. Explain why it...

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Tutorial 9 Answers 1. Explain why it is necessary for an Australian company to translate foreign currency transactions into Australian dollars? If the transactions were not denominated into Australian dollars then the financial  statements could be made-up of accounts that were denominated in numerous currencies.  Such financial statements would be impossible to interpret.   2. At the balance date of a reporting entity, are any adjustments necessary in relation to the reporting entity’s foreign currency monetary items? How should any adjustments be treated for accounting purposes? At balance date (also referred to as reporting date) all foreign currency monetary assets  and liabilities must be translated to Australian dollar equivalents using the exchange rate  in place at balance date. Apart from a limited number of cases (for example, transactions  relating to assets not yet ready for use and gains and losses pertaining to hedges of  specific commitments), gains or losses on translating the foreign currency monetary items  must be treated as either expenses or revenues of the reporting period. 3. When initially recognising a transaction that is denominated in a foreign currency, what exchange rates should be used to translate the transaction to Australian dollars? When a transaction occurs that is denominated in a foreign currency, that transaction  should initially be translated at the exchange rate in place at the date of the transaction  (also referred to as the ‘spot rate’). 4. Some inventory is acquired from an overseas supplier with the debt denominated in a foreign currency. If the exchange rate moves against the Australian dollar while the debt is outstanding, how should this movement be treated for accounting purposes? If the exchange rate moves against the Australian dollar and the debt is outstanding then  this will result in an increase in the Australian dollar equivalent of the amount that is  payable. This increase is to be treated as an expense. It is not to be adjusted against the  cost of the inventory.
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5. What is a “qualifying asset” and how do we treat exchange rate
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This note was uploaded on 04/30/2011 for the course BUSS 3003 taught by Professor Kentwilson during the Three '11 term at South Australia.

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Tutorial 9 Answers - Tutorial 9 Answers 1. Explain why it...

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