Question

Question 3 [8 marks]

Topic 5: Accounting for foreign currency transactions

Behappy Ltd is an Australian company with a reporting period ends on 30 June. The company has entered into two independent transactions denominated in foreign currency as follows.

Behappy Ltd sells some goods on credit on 13 June 2018 to a Singaporean company, Mother Kwan. The contract, denominated in Singapore dollars, amounts to $125,000. Mother Kwan settles the contract on 10 July 2018.

The relevant exchange rates are as follows:

13 June 2018	A$1.00 = S$1.2536
30 June 2018	A$1.00 = S$1.2875
10 July 2018	A$1.00 = S$1.3103

2. On 15 June 2018, Behappy Ltd acquires plant and equipment on credit from Senang Bhd, a Malaysian company. The contract is denominated in Malaysian Ringgit and the acquisition amounts to MYR300,000. Behappy Ltd settles the contract on 20 July 2018.

The relevant exchange rates are as follows:

15 June 2018	A$1.00 = MYR2.8079
30 June 2018	A$1.00 = MYR2.9946
20 July 2018	A$1.00 = MYR2.7152

Required:

In accordance with AASB 121, prepare all relevant journal entries of Behappy Ltd to account for the above transactions.

Question 3	Max. marks allocated
Journal entries for transaction (1)	4
Journal entries for transaction (2)	4
Total	8

Answer 1

1) Journal Entries :-

Date	Particulars	Debit($)	Credit($)
Jun 13	Trade Receivables A/c Dr.	99713
	To Sales A/c ($125000/1.2536)		99713
	(To Record Sales at Spot Rate)
Jun 30	Unrealised Exchange loss A/c Dr.	2626
	To Trade Receivable A/c(99713-(125000/1.2875))		2626
	(To Record Difference parked in unrealised foreign exchange losses)
Jul 10	Cash A/c Dr. ($125000/1.3103)	95398
	Realised Exchange Loss A/c Dr. (Balanceing Figure)	4315
	To Trade Receivable A/c ($125000/1.2875)		97087
	To Unrealised Exchange Loss A/c		2626

2) Journal Entries :-

Date	Particulars	Debit($)	Credit($)
Jun 15	Plant and Equipment A/c Dr.	106841
	To Trade Payable A/c ($300000/2.8079)		106841
	(To Record Purchase of Plant and Equipment at Spot Rate)
Jun 30	Trade Payable A/c Dr.	6661
	To Unrealised Exchange Loss A/c($106841-($300000/2.9946))		6661
	(To Record Difference parked in unrealised foreign exchange Loss)
Jul 10	Trade Payable A/c Dr. ($300000/2.9946)	100180
	Unrealised Exchange Loss A/c Dr.	6661
	To Cash A/c ($300000/2.7152)		110489
	To Realised Exchange Loss A/c (Balancing Figure)		3648