Question

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.

Question 3	Max. marks allocated
Journal entries	6

Answer 1

Solution:

Journal Entries - Soul Ltd
Date	Particulars	Debit (A$)	Credit (A$)
1-Feb-18	No Entry
30-Apr-18	Accounts receivables Dr ($400,000/0.75)	$533,333.33
	To Sales Revenue		$533,333.33
	(Being sales recorded)
30-Apr-18	Cash Dr ($120,000/0.75)	$160,000.00
	To Accounts receivables		$160,000.00
	(Being cash received from US Customer)
30-Jun-18	Accounts Receivables Dr ($280,000 /0.70 - $280,000/0.75)	$26,666.67
	To Foreign currency exchange gain		$26,666.67
	(Being receivales recorded at fair value considering fluctuating currency rates)
31-Jul-18	Cash Dr ($80,000/0.74)	$108,108.11
	Foreign currency exchange loss Dr	$6,177.61
	To Accounts Receivables ($80000/0.70)		$114,285.71
	(Being cash received from US customer)
31-Aug-18	Cash Dr ($200,000/0.78)	$256,410.26
	Foreign currency exchange loss Dr	$29,304.03
	To Accounts Receivables ($200000/0.70)		$285,714.29
	(Being cash received from US customer)