Question

GMOTA ltd enters into a binding contract with INDUROBOTICS plc for them (UK company) to build a spray painting unit for use in their car manufacturing for pound 1875000 on 12th october 2014. Construction is completed on 5th may 2015 and is shipped that day, FOB Southhampton (UK). As at 30th june 2015 the debt is still outstanding. Title for the unit occured when FOB. Round off to nearest dollar.

Exchange rates are as follows:

12/10/2014 AUD 1= Pound 0.52

05/05/2015 AUD 1= Pound 0.43

30/06/2015 AUD 1= Pound 0.45

Required: Prepare the journal entries for the three dates.

Answer 1

The journal entries of the following three dates is as follows:-

After converting the pounds gives into the AUD using the given exchange rates.

Exchange rates are as follows:

12/10/2014 AUD 1= Pound 0.52

05/05/2015 AUD 1= Pound 0.43

30/06/2015 AUD 1= Pound 0.45

For 12/10/2014

• Construction in progress A/c Dr 975000

To Cash A/c 975000

(Being Construction is started on the given date)

For 05/05/2015

• Factory (Spray Paint) A/c Dr 806250

To Contractor A/c 806250

(Being given contract of construction is completed on the given date)

For 30/06/2015

• Factory (Spray Paint) A/c Dr 843750

To INDUROBOTICS plc A/c. 843750

(Being INDUROBOTICS plc is still unpaid and now as a creditor of the GMOTA co.)