Page 364 - FR Integrated Workbook 2018-19
P. 364

Chapter 24




               Chapter 11







                   Example 1




                   Settled transactions

                   On 1 April 20X8 Collins Co, a company that uses the dollar ($) as its
                   functional currency, buys goods from an overseas supplier, who uses Kromits
                   (Kr) as its functional currency. The goods are priced at Kr54,000. Payment is
                   made 2 months later on 31 May 20X8.

                   The prevailing exchange rates are:


                   1 April 20X8 Kr1.80 : $1

                   31 May 20X8 Kr1.75 : $1

                   Required:

                   Record the journal entries for these transactions.


                   Solution

                   1     1 April 20X8 Purchase

                         Kr54,000 @ 1.80 = $30,000

                               Dr Purchase                                       $30,000


                               Cr Payables                                       $30,000

                   2     31 May 20X8 Payment

                         Kr54,000 @ 1.75 = $30,857 (amount paid)

                               Dr Purchases (original figure to clear)           $30,000

                               Dr SPL: Exchange loss (balance)                       $857


                               Cr Bank                                           $30,857








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