Question

Part A (10 marks)

Funny Ltd purchased merchandises for resale purpose amounting to Australian dollar $100,000 on 1 October 2018, in which 70% of these merchandises were sold before the year-end.

There were no other purchases of merchandises during 2018. The half of the amount was settled on 15 December 2018 and the balance was paid on 20 January 2019.

On 31 December 2018, the estimated net realizable value of the ending inventories was at A$24,000.

The financial year-end of the company is 31 December.

               Spot rate

1 October 2018                                   A$1 = HK$6

15 December 2018                              A$1 = HK$5.8

31 December 2018                              A$1 = HK$5.9

20 January 2019                                  A$1 = HK$6.1

(Note: A$=Australian dollar)

Required:

Prepare ALL journal entries for the years 2018 and 2019 relating the acquisition of merchandises, settlement of debt, exchange difference, and ending inventories (if any).                [10 marks]

Answer 1

Year 2018 Desir Bare Oct, 2018 15 dec, 2018 $19000 Journal Entries in the books of funny itd. Particulats Credit merchandises (6X100,000) $600,000 Accoute payable 1600,000 (Being weechandises purchased) Accouts Payable ($600,000/2) $300ooo carlo ($300,6001685.8) $ 299000 Exchange gain (Being amond paid towards purchases) Aecouts Payable (#300000 16x8.1) $5,000 Exchange gain $5000 (Being liasility revalued) Impairment loss $38,400 wierchandise-inventory $38,400 (Being inventory revalued) 31 Dec, 18 31 Dee, 18 Year 2015 $29,5000 $ 10,000 20 Jan, 19 $ 30,5000 Accouts Payable Exchainge woss cash ($50,000 X 6.1) (Being amat paid) 2019.11.28 15:12