Acct6007 financial accounting theory and practice prepare

Question

Financial Accounting Theory and Practice

Module - Accounting for Foreign Currency Transactions

Question 1 -

On 1 May 2016Darlington Ltd acquired goods on credit from an American supplier. The goods were shipped from California on the same date. The goods cost US $50 000. Darlington Ltd paid the American supplier on 15thAugust 2016.

Exchange rates are given below:

1 May 2016                         A$1.00 = US$0.70

30 June 2016                      A$1.00 = US$0.80

15August 2016                   A$1.00 = US$0.85

Required: Prepare journal entries to record this transaction.

Question 2 -

Allenby Ltd is an Australian company whose functional currency is Australian dollars. On 25thMay 2016, Allenby Ltd sold a designer suit to a company in France for20 000 Euros. Allenby delivered the suit to the French customer on 25^th June 2016. The financial year end is 30th June and the customer paid for the suit on 15th July 2016.

Exchange rates:

25^th May 2016                    A$1.00 = 0.70Euros

25^th June 2016                    A$1.00 = 0.58 Euros

30^th June 2016                    A$1.00 = 0.62 Euros

15^th July 2016                      A$1.00 = 0.60 Euros

Required:

(i) Prepare journal entries to record the above transactions for Allenby Ltd from 25th May to 15th July 2016 inclusive.

(ii) Calculate the overall foreign currency gain or loss from this sale.