Question

QUESTION THREE [27]

Amo Limited is a South African company that supplies government military supplies.
Both the functional and presentation currency of Amo Limited is the South African Rand.
During 2018, Amo Limited imported 20 high tech voice recording devices from a supplier in the UK.
The cost of each device was GBP 5 000 including shipping.

- A firm order was placed with the UK company on 20 February 2018.

- The devices were shipped on 15 April 2018 and were scheduled to arrive at the port in
Durban on 25 May 2018.

- Due to bad weather conditions and rough seas on the way to Durban, the ship had been
delayed by 6 days, arriving on 31 May 2018.

- The devices were shipped on a CIF basis.

On 31 December 2018, 20% of the devices remained unsold. All the devices that were sold
had been sold at a mark-up of 30% on cost. Amo Limited paid the UK company on
5 February 2019. Amo Limited has a 31 December year end.

Date Spot Rate - GB Pound : SA Rand

20 February 2018 - 0.1111: 1
15 April 2018 - 0.1087: 1
25 May 2018 - 0.1042: 1
31 May 2018 - 0.1031: 1
31 December 2018 - 0.1099: 1
5 February 2019 - 0.1124: 1

Required
Show all related journal entries in the books of Amo Limited for its years ended
31 December 2018 and 2019.

Answer 1

Journal entries for the year ended 31 December, 2018-
Purchase A/c--- Dr.	9,69,932
To Trade Payables A/c		9,69,932
(Being purchases recorded)
Inventory A/c---Dr.	9,69,932
To Purchases A/c		9,69,932
(Being inventory recorded)
Cash/ Bank A/c---Dr.	10,08,729.39
To Inventory/COGS A/c		10,08,729
(Being 80% of inventory sold)
Journal entries for the year ended 31 December, 2019-
Trade payable A/c---Dr.	9,69,932
To Cash/ Bank A/c		8,89,680
To Realized forex gain A/c		80,252
(Being supplier paid)