Question

PPE UK PLC purchased a sophisticated 3D printer for their own use on credit for EUR50,000 on 23 February 2018. The payable was settled on 10 April 2018. The following were the exchange rates:

23 February 2018 €0.741 : $1

31 March 2018 €0.753 : $1

10 April 2018 €0.731 : $1

At 31 March 2018 which is the entity’s year-end, what amounts would have been held in respect of this transaction? Select one: a. Non-current assets at cost of $67,476 and payables of $66,401 b. Non-current assets at cost of $66,401 and payables of $66,401 c. Non-current assets at cost of $67,476 and payables of $67,476 d. Non-current assets at cost of $68,399 and payables of $68,399

Select one:

a. Non-current assets at cost of $67,476 and payables of $66,401

b. Non-current assets at cost of $66,401 and payables of $66,401

c. Non-current assets at cost of $67,476 and payables of $67,476

d. Non-current assets at cost of $68,399 and payables of $68,399

This question is based on IAS 21. I asked different people one said answer is C, other said A. Though I think A should be the correct one, now is it?

Answer 1

Correct Answer Is A.

According To IAS 21

Foreign currency monetary item should be reported using the closing exchange rate.

As Payable Of EUR 50000 is Monetary Item Should be reported at closing rate of 0.753.

Payable =50000/0.753=66,401.06

Non-monetary items carried at historical cost should be reported using the exchange rate at the date of the transaction.

As Non current asset being non monetary item should be reported using rate 0.741 at transaction date of 23 April.

Non Current Asset =50000/.741=67,476.38

So A Is correct Answer