Exam 23: Foreign Currency Transactions and Forward Exchange Contracts

On 1 June 2022, Dubbo Ltd acquires inventories for cash of US$400 000. All of the inventories are still on hand at 30 June 2022 and have a net realisable value at that date of US$420 000. Relevant exchange rates are: 1 June 2022     US$1.00 = A$1.30 30 June 2022    US$1.00 = A$1.20 The journal entry recorded by Dubbo Ltd to remeasure the inventories at 30 June 2022 is:

The exchange rate used at the end of the reporting period is:

Hedge effectiveness is ascertained from:

The accounting standard, AASB 121 The Effects of Changes in Foreign Exchange Rates, covers which of the following?

The type of hedge which is of the exposure to the variability in cash flows that is attributable to a particular risk that is associated with all, or some component of, a recognised asset or liability is a:

The degree to which changes in the fair value of a forward contract offset changes in the fair value or cash flows of a hedged item, describes:

The Australian financial news quoted US$1.00 equals A$0.8836/0.9105. What does this represent?

On 25 June, Wattle Ltd acquires equipment on credit terms from a New Zealand supplier, Timaru Ltd, for NZ$240 000. The exchange rate at 25 June was NZ$1.00 = A$095. On 30 June the exchange rate is NZ$1.00 = A$0.90. Wattle Ltd pays Timaru Ltd in full on 7 July when the exchange rate is NZ$1.00 = A$0.92. The journal entry recorded by Wattle Ltd to remeasure the foreign currency monetary unit at settlement date of 7 July is:

Foreign exchange risk may relate to:

On 1 July 2022, Jimbour Ltd enters a loan agreement with the Bank of New Zealand to borrow NZ$200 000. The funds are to be used to purchase materials needed for the construction of a manufacturing plant. By 31 December 2022, additional costs of A$75 000 have been paid to complete the manufacturing plant. Interest on the funds borrowed is payable half-yearly in arrears at the fixed interest rate of 5% p.a. Relevant exchange rates are: 1 July 2022 NZ$1.00 = A$0.75 Average July to December 2022 NZ$1.00 = A$0.77 31 December 2022 NZ$1.00 = A$0.85 Average January to June 2023 NZ$1.00 = A$0.80 30 June 2023 NZ$1.00 = A$0.70 The interest expense and any foreign exchange gain or loss on the interest at 31 December 2022 is:

FOB is the term of agreement whereby the seller retains ownership while the goods are in transit and the buyer obtains ownership when the goods have been received into its store.

Revenues and expenses denominated in a foreign currency, if assumed to be earned or incurred evenly during the financial period, and translated using the:

On 25 June, Wattle Ltd acquires equipment on credit terms from a New Zealand supplier, Timaru Ltd, for NZ$240 000. The exchange rate at 25 June was NZ$1.00 = A$095. On 30 June the exchange rate is NZ$1.00 = A$0.90. Wattle Ltd pays Timaru Ltd in full on 7 July when the exchange rate is NZ$1.00 = A$0.92. The journal entry recorded by Wattle Ltd to remeasure the outstanding foreign currency monetary unit at 30 June is:

For a company that has A$ as its functional currency, which of the following is not a foreign currency transaction?

A decrease in the direct rate of US$1 to A$# results in: