Soul Ltd is an Australian company that makes and sells small electronic goods an

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.

Required:

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

Max. marks allocated

6

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

Explanation / Answer

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)

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