Question

Question 9
On 15 May 2020 Penn Ltd, an Australian company with functional currency of Australian
dollars acquires goods on credit from a supplier in Cardiff. The goods are shipped FOB
Cardiff on 15 May 2020. The cost of the goods is UK200,000 and the debt remains unpaid at
30 June 2020. On 15 May 2020 the exchange rate is A$1.00 = UK0.56. On 30 June 2020 it is
A$1.00 = UK0.53. Penn Ltd's reporting date is 30 June.

Provide the accounting entries necessary to account for the above purchase transaction
for the year ending 30 June 2020.

Answer 1

Date	Journal	Dr	Cr
15/05/2020	Purchase ac                                            Dr	A$ 357142.85
	To Supplier Cardiff		A$ 357142.85
	(credit purchase entry)
	exchange rate on may15- 1A$=UK.0.56
30/06/2020	Loss on exchange rate ac                    Dr	A$ 20215.64
	To Supplier Cardiff		A$ 20215.64
	(recording exchange rate difference on
	closing date)
	exchange rate on 30 june 2020-
	1A$=UK 0.53