Topic 5: Accounting for foreign currency transactions Soul Ltd is an Australian
ID: 2553841 • Letter: T
Question
Topic 5: Accounting for foreign currency transactions
Soul Ltd is an Australian company that makes and sells small electronic goods and its financial year ends on 30 June. On 1 February 2018, a customer from the United States ordered some goods from Soul Ltd at an invoice cost of US$400,000 on terms FOB destination. On 30 April 2018, the goods were delivered to the customer. The agreed payment arrangements are that 30% of the total amount owing would be paid on delivery, 20% three months after delivery, and the remaining 50% four months after delivery. The end of the reporting period for Soul Ltd is 30 June. The following exchange rates are applicable.
1 February 2018
A$1 = US$0.77
30 April 2018
A$1 = US$0.75
30 June 2018
A$1 = US$0.70
31 July 2018
A$1 = US$0.74
31 August 2018
A$1 = US$0.78
Required:
In accordance with AASB 121, prepare the relevant journal entries of Soul Ltd to account for the above transactions.
be able to discuss and apply the relevant accounting standards and statutory reporting requirements for foreign currency dealings. This practical question needs to be done asap. thank you and what is need to be done is mentioned in the required field.
1 February 2018
A$1 = US$0.77
30 April 2018
A$1 = US$0.75
30 June 2018
A$1 = US$0.70
31 July 2018
A$1 = US$0.74
31 August 2018
A$1 = US$0.78
Explanation / Answer
ENTRIES- DEBIT CREDIT
1-soul ltd 308000
sales (400000*.77) 308000
2-Bank 90000
soul ltd (400000*30/100*.75) 90000
3-revenue 19600
forex loss (480000*70/100*.07) 19600
4-bank 59200
soul ltd (400000*20/100*.74) 59200
5-bank 156000
soul ltd (400000*50/100*.78) 156000