Multiple Choice

1.The Australian Financial News quoted A$1.00 equals US$1.15/1.18. What does this represent?

a. A bid rate of A$1.15.

b. A bid rate of US$1.18.

c. An offer rate of A$1.18.

d. An offer rate of US$1.18.

2.According to AASB 121, all the following items are 'monetary items' except for:

a. borrowings 60 000.

b. trade payable of 100 000.

c. trade receivable of US$24 000.

d. shares held in BHP Ltd listed on the ASX.

3.At the commencement of the lease agreement the lessor recognises the balance of the lease receivable as the:

a. the nominal value of the lease payments receivable from the lessee.

b. the present value of the lease payments receivable from the lessee.

c. the present value of the residual value of the asset.

d. the present value of the lease payments receivable from the lessee and the present value of the unguaranteed residual value.

Question 1

Translation of various foreign currency transactions and balances

On 1 June 2023, Laurie Ltd, an Australian company with a functional currency of A$ entered into various transactions in NZ$ when the exchange rate was A$1.00 = NZ$1.30. Any assets arising from the NZ$ transactions are still on hand and any liabilities remain unsettled. On 30 June 2023, the exchange rate is A$1.00 = NZ$1.20.

Required

Translate each of following items for initial and subsequent measurement as appropriate.

1.sales revenue and accounts receivable of NZ$20 000

2.inventories and accounts payable of NZ$32 000

3.plant NZ$72 000

4.interest-free borrowings of NZ$125 000.

Question 2

Accounting by lessee

On 1 July 2022, Monkey Ltd leased a plastic-moulding machine from Wise Ltd. The machine cost Wise Ltd $65000 to manufacture and had a fair value of $77 055 on 1 July 2022. The lease agreement contained the following provisions.

Lease term

4 years

Annual rental payment, in advance on 1 July each year

$20 750

Residual value at end of the lease term

$7 500

Residual guaranteed by lessee

nil

Interest rate implicit in lease

8%

The lease is cancellable only with the permission of the lessor.

The expected useful life of the machine is 5 years. Monkey Ltd intends to return the machine to the Wise Ltd at the end of the lease term. Included in the annual rental payment is an amount of $750 to cover the costs of maintenance and insurance paid for by the lessor.

Required

Do the lease payments schedule for the Monkey Ltd (show all workings).