Question

In: Accounting

Hundar Ltd is a Japanese car manufacturer. On 1 March 2020, Vicpark Ltd, an Australian African...

Hundar Ltd is a Japanese car manufacturer. On 1 March 2020, Vicpark Ltd, an Australian African company, purchased 50 cars from Hundar Ltd. The terms of the contract are FOB shipping, with the invoice denominated in Japanese Yen. The order was completed on 25 May 2020, shipped from Nagoya Port (the largest port in Japan) on 1 June and received by Vicpark Ltd on 25 June 2020. The total cost of the cars was 70 million Yen. Vicpark Ltd’s reporting date is 30 June. Vicpark Ltd settled the payment on 31 July 2020. Selected exchange rates were:

AU$ Japanese yen
1-mar-20 $1.00 73.44
25-may-20 $1.00 74.15
1-jun-20 $1.00 72.66
25-jun-20 $1.00 73.76
30-jun-20 $1.00 73.69
31-jul-20 $1.00 70.47

Required:

Prepare all journal entries required by Vicpark Ltd (the Australian company) to record the above transactions. Narrations are not required but you must show all workings and round figures to the nearest dollar. (5 Marks, 4 marks for correct journal entries, 1 mark for your workings)

Solutions

Expert Solution

Keep in mind before jump to the answer:

1. As the the term of contract is FOB (Free on board) shipping, the Forex risk is shifted to buyer (Vicpark Ltd.) from seller (Hundar Ltd.).

2. Journal entries are required only for transaction in monetary terms. Total two journal is required for this case. First one for the purchase and the second one for settlement of payment. Completion of order, shipped from Nagoya Port and received by Vicpark Ltd on 25 June 2020, these all are non monetary events, hence there is no scope in accounting to journalize these.

Journal entries

In the books of Vicpark Ltd.

Workings:

ekkarill92 answered 2 years ago
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