On 1 May 2015 Harriet's Importers Ltd acquires goods from a supplier in Britain.The goods are shipped f.o.b.from England on 1 May 2015.The cost of the goods is £200 000.The amount has not been paid at period end 30 June 2015.Exchange rates are as follows: \[\begin{array} { | l | l | } \hline 1 \text { May } 2015 & \text { A\$1.00 } = £ 0.46 \\ \hline 30 \text { June } 2015 & \text { A\$1.00 } = £ 0.50 \\ \hline \end{array}\] Harriet's Importers Ltd uses a perpetual inventory system. What entries are required at transaction date and reporting date (rounded to the nearest whole A$)?

A) $1 \text { May } 2015$ $\begin{array}{|l|l|r|r|} \hline \text { Dr } & \text { Accounts receivable } & 92000 & \\ \hline \mathrm{Cr} & \text { Inventory } & & 92000 \\ \hline \end{array}$ $3 \text { June } 2015$ $\begin{array}{|l|l|r|r|} \hline \mathrm{Dr} & \text { Accounts receivable } & 8000 & \\ \hline \mathrm{Cr} & \text { Exchange gain (P\&L) } & & 8000 \\ \hline \end{array}$ B) $1 \text { May } 2015$ $\begin{array}{|l|l|r|r|} \hline \mathrm{Dr} & \text { Inventory } & 434783 & \\ \hline \mathrm{Cr} & \text { Accounts payable } & & 434783 \\ \hline \end{array}$ $3 \text { June} 2015$ $\begin{array}{|l|l|r|r|} \hline \mathrm{Dr} & \text { Accounts payable } & 34783 & \\ \hline \mathrm{Cr} & \text { Exchange gain (P\&L) } & & 34783 \\ \hline \end{array}$ C) $\begin{array}{l} 1 \text { May } 2015\\ \begin{array} { | c | l | r | r | } \hline \mathrm { Dr } & \text { Purchases } & 108000 & \\ \hline \mathrm { Cr } & \text { Cash } & & 108000 \\ \hline \end{array}\\\\ 30 \text { June } 2015 \\ \begin{array}{|l|l|l|l|} \hline \mathrm { Dr } & \text { Accounts payable } & 8000 & \\ \hline \mathrm { Cr } & \text { Exchange gain } ( \mathrm { P \& L } ) & & 8000 \\ \hline \end{array} \end{array}$ D) $\begin{array}{l} 1 \text { May } 2015\\ \begin{array} { | c | l | r | r | } \hline \mathrm { Dr } & \text { Inventory } & 370370 & \\ \hline \mathrm { Cr } & \text { Accounts payable } & & 370370 \\ \hline \end{array}\\\\ 30 \text { June } 2015\\ \begin{array}{|l|l|l|l|} \hline \mathrm { Dr } & \text { Exchange loss } & 29630 & \\ \hline \mathrm { Cr } & \text { Accounts payable } & & 29630 \\ \hline \end{array} \end{array}$ A) $1 \text { May } 2015$ $\begin{array}{|l|l|r|r|} \hline \text { Dr } & \text { Accounts receivable } & 92000 & \\ \hline \mathrm{Cr} & \text { Inventory } & & 92000 \\ \hline \end{array}$ $3 \text { June } 2015$ $\begin{array}{|l|l|r|r|} \hline \mathrm{Dr} & \text { Accounts receivable } & 8000 & \\ \hline \mathrm{Cr} & \text { Exchange gain (P\&L) } & & 8000 \\ \hline \end{array}$ B) $1 \text { May } 2015$ $\begin{array}{|l|l|r|r|} \hline \mathrm{Dr} & \text { Inventory } & 434783 & \\ \hline \mathrm{Cr} & \text { Accounts payable } & & 434783 \\ \hline \end{array}$ $3 \text { June} 2015$ $\begin{array}{|l|l|r|r|} \hline \mathrm{Dr} & \text { Accounts payable } & 34783 & \\ \hline \mathrm{Cr} & \text { Exchange gain (P\&L) } & & 34783 \\ \hline \end{array}$ C) $\begin{array}{l} 1 \text { May } 2015\\ \begin{array} { | c | l | r | r | } \hline \mathrm { Dr } & \text { Purchases } & 108000 & \\ \hline \mathrm { Cr } & \text { Cash } & & 108000 \\ \hline \end{array}\\\\ 30 \text { June } 2015 \\ \begin{array}{|l|l|l|l|} \hline \mathrm { Dr } & \text { Accounts payable } & 8000 & \\ \hline \mathrm { Cr } & \text { Exchange gain } ( \mathrm { P \& L } ) & & 8000 \\ \hline \end{array} \end{array}$ D) $\begin{array}{l} 1 \text { May } 2015\\ \begin{array} { | c | l | r | r | } \hline \mathrm { Dr } & \text { Inventory } & 370370 & \\ \hline \mathrm { Cr } & \text { Accounts payable } & & 370370 \\ \hline \end{array}\\\\ 30 \text { June } 2015\\ \begin{array}{|l|l|l|l|} \hline \mathrm { Dr } & \text { Exchange loss } & 29630 & \\ \hline \mathrm { Cr } & \text { Accounts payable } & & 29630 \\ \hline \end{array} \end{array}$

On 1 May 2014 Moorooba Exporters Ltd sells inventory to a customer in Singapore.The inventory is sold for $S300 000 and payment is not due until 30 July 2014.The reporting date for Moorooba Exporters Ltd is 30 June.The exchange rate information is: \[\begin{array} { | l | l | } \hline 1 \text { May } 2014 & \text { A\$1 } = \$ S 1.10 \\ \hline 30 \text { June } 2014 & \text { A\$1 } = \$ S 1.25 \\ \hline 30 \text { July } 2014 & \text { A\$1 } = \$ S 0.95 \\ \hline \end{array}\] Moorooba Exporters uses a perpetual inventory system.What journal entries are required in Moorooba Exporters Ltd's books to record the transaction,adjustments at the end of the period and settlement in accordance with AASB 121 (rounded to the nearest whole A$)? What is the realised gain/loss on the monetary item?

A) Realised loss $45 000 B) Realised loss $66 667 C) Realised gain $43 062 D) Realised gain $90 000 A) Realised loss $45 000 B) Realised loss $66 667 C) Realised gain $43 062 D) Realised gain $90 000

Exam 32: Accounting for Foreign Currency Transactions

On 1 May 2015 Harriet's Importers Ltd acquires goods from a supplier in Britain.The goods are shipped f.o.b.from England on 1 May 2015.The cost of the goods is £200 000.The amount has not been paid at period end 30 June 2015.Exchange rates are as follows: 1 May 2015 A \1 .00 =£0.46 30 June 2015 A \1 .00 =£0.50 Harriet's Importers Ltd uses a perpetual inventory system. What entries are required at transaction date and reporting date (rounded to the nearest whole A$)?

(Multiple Choice)

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Question 21

The three principal types of hedges referred to in AASB 139 are:

(Multiple Choice)

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Question 22

The functional currency of an entity:

(Multiple Choice)

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Question 23

Which of the following items is a commonly used swap?

(Multiple Choice)

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Question 24

An example of a foreign currency swap is when a loan denominated in one currency is swapped for a loan denominated in another currency.

(True/False)

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Question 25

On 1 May 2014 Moorooba Exporters Ltd sells inventory to a customer in Singapore.The inventory is sold for $S300 000 and payment is not due until 30 July 2014.The reporting date for Moorooba Exporters Ltd is 30 June.The exchange rate information is: 1 May 2014 A \1 =\ S1.10 30 June 2014 A \1 =\ S1.25 30 July 2014 A \1 =\ S0.95 Moorooba Exporters uses a perpetual inventory system.What journal entries are required in Moorooba Exporters Ltd's books to record the transaction,adjustments at the end of the period and settlement in accordance with AASB 121 (rounded to the nearest whole A$)? What is the realised gain/loss on the monetary item?

(Multiple Choice)

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Question 26

AASB 121 requires that the initial recognition of a foreign currency transaction be:

(Multiple Choice)

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Question 27

The hedge effectiveness criteria prescribed in AASB 139 have made which type of financial instrument much less effective as a potential hedging instrument?

(Multiple Choice)

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Question 28

On 1 July 2015 Jarrets Ltd borrows £500 000 from a British bank at an interest rate of 8 per cent,repayable in pounds sterling (£)and with interest due on 30 June each year.The term of the loan is 3 years.On the same date Fitners Ltd borrows A$1 million from an Australian bank at an interest rate of 10 per cent.The term of the loan is 3 years.Jarrets and Fitners decide to swap their interest and principal obligations on 1 July 2015.Exchange rate information is as follows: 1 July 2015 A \1 .00 =£0.50 30 June 2016 A \1 .00 =£0.55 Both Jarrets and Fitners are Australian companies.What are the journal entries to record the swap for the period ended 30 June 2016 in Jarrets Ltd's books (rounded to the nearest whole A$)?

(Multiple Choice)

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Question 29

The essential feature of a non-monetary item is the absence of a right to receive (or an obligation to deliver)a fixed or determinable number of units of currency.

(True/False)

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Question 30

A foreign currency transaction shall be recorded on initial recognition in the:

(Multiple Choice)

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Question 31

Exchange gains or losses on a qualifying asset that arise before it ceases to be a qualifying asset are to be deferred and amortised over the life of the asset according to AASB 123.

(True/False)

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Question 32

Exchange differences recognised as borrowing costs and included in the cost of an asset,are not recognised:

(Multiple Choice)

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Question 33

The purpose of 'hedge accounting' is to recognise the offsetting effects on profit or loss of changes in the nominal values of the financial instrument and the hedging instrument.

(True/False)

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Question 34

The effect of an increase in the exchange rate for Australian dollars relative to other major world currencies would include:

(Multiple Choice)

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Question 35

The Big Mac index is:

(Multiple Choice)

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Question 36

AASB 121 defines an exchange rate as a ratio for the exchange of two currencies at a particular time.

(True/False)

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Question 37

On 1 July 2015 Jarrets Ltd borrows £500 000 from a British bank at an interest rate of 8 per cent,repayable in pounds sterling (£)and with interest due on 30 June each year.The term of the loan is 3 years.On the same date Fitners Ltd borrows A$1 million from an Australian bank at an interest rate of 10 per cent.The term of the loan is 3 years.Jarrets and Fitners decide to swap their interest and principal obligations on 1 July 2015.Exchange rate information is as follows: 1 July 2015 A \1 .00 =£0.50 30 June 2016 A \1 .00 =£0.55 Both Jarrets and Fitners are Australian companies.What are the journal entries to record the swap for the period ended 30 June 2016 in Fitners Ltd's books (rounded to the nearest whole A$)?

(Multiple Choice)

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Question 38

Management may exercise its judgment to determine the functional currency that most faithfully represents the economic effects of the underlying transactions,events and conditions.

(True/False)

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Question 39

Common examples of qualifying assets are assets that result from development and construction activities in:

(Multiple Choice)

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Question 40

Showing 21 - 40 of 78

Exam 32: Accounting for Foreign Currency Transactions

The three principal types of hedges referred to in AASB 139 are:

The functional currency of an entity:

Which of the following items is a commonly used swap?

An example of a foreign currency swap is when a loan denominated in one currency is swapped for a loan denominated in another currency.

AASB 121 requires that the initial recognition of a foreign currency transaction be:

The hedge effectiveness criteria prescribed in AASB 139 have made which type of financial instrument much less effective as a potential hedging instrument?

The essential feature of a non-monetary item is the absence of a right to receive (or an obligation to deliver)a fixed or determinable number of units of currency.

A foreign currency transaction shall be recorded on initial recognition in the:

Exchange gains or losses on a qualifying asset that arise before it ceases to be a qualifying asset are to be deferred and amortised over the life of the asset according to AASB 123.

Exchange differences recognised as borrowing costs and included in the cost of an asset,are not recognised:

The purpose of 'hedge accounting' is to recognise the offsetting effects on profit or loss of changes in the nominal values of the financial instrument and the hedging instrument.

The effect of an increase in the exchange rate for Australian dollars relative to other major world currencies would include:

The Big Mac index is:

AASB 121 defines an exchange rate as a ratio for the exchange of two currencies at a particular time.

Management may exercise its judgment to determine the functional currency that most faithfully represents the economic effects of the underlying transactions,events and conditions.

Common examples of qualifying assets are assets that result from development and construction activities in:

An Overview of the Australian External Reporting Environment

The Conceptual Framework of Accounting and Its Relevance to Financial Reporting

Theories of Accounting

An Overview of Accounting for Assets

Depreciation of Property, plant and Equipment

Revaluations and Impairment Testing of Non-Current Assets

Inventory

Accounting for Intangibles

Accounting for Heritage Assets and Biological Assets

An Overview of Accounting for Liabilities

Accounting for Leases

Accounting for Employee Benefits

Share Capital and Reserves

Accounting for Financial Instruments

Revenue Recognition Issues

The Statement of Comprehensive Income and Statement of Changes in Equity

Accounting for Share-Based Payments

Accounting for Income Taxes

The Statement of Cash Flows

Accounting for the Extractive Industries

Accounting for General Insurance Contracts

Accounting for Superannuation Plans

Events Occurring After the End of the Reporting Period

Segment Reporting

Related Party Disclosures

Earnings Per Share

Accounting for Group Structures

Further Consolidation Issues I: Accounting for Intragroup Transactions

Further Consolidation Issues II: Accounting for Non-Controlling Interests

Further Consolidation Issues IV: Accounting for Changes in the Degree of Ownership of a Subsidiary

Accounting for Equity Investments,including Investments in Associates and Joint Arrangements

Translating the Financial Statements of Foreign Operations

Accounting for Corporate Social Responsibility

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