On 1 January 2019, Sun & Moon Bhd bought an equipment with a useful life of 5 years from Granade Bhd, a supplier in Singapore for S$200,000. The exchange rate on that date was S$1:RM2.50. At the inception, Sun & Moon Bhd paid a deposit of 20%. Sun & Moon Bhd's functional currency is the Ringgit Malaysia, and the financial year end is 31 December 2019.

On 31 December 2019, the exchange rate was S$1:RM2.70.

1.Discover the false statement in relation to foreign currency items reported as at 31 December 2019.

a)Monetary items are reported at the closing rate.

b)Non-monetary items carried in terms of historical cost are reported at the closing rate.

c)Non-monetary items carried in terms of historical cost are reported at the exchange rate on the transaction date.

d)Exchange differences arising from translation are recognized as income or expense of the current year.

ANSWER:

2.Indicate the gain or loss on foreign exchange as at 31 December 2019.

a)Loss of RM32,000

b)Gain of RM32,000

c)Loss of RM4,741

d)Gain of RM4,741

ANSWER:

3.Illustrate journal entry for the above transaction as at 31 December 2019.

a)Debit loss in foreign exchange RM32,000; credit account payable RM32,000

Debit depreciation RM100,000; credit accumulated depreciation RM100,000

b)Debit account payable RM32,000; credit gain in foreign exchange RM32,000

Debit depreciation RM100,000; credit accumulated depreciation RM100,000

c)Debit loss in foreign exchange RM32,000; credit account payable RM32,000

Debit depreciation RM16,000; credit accumulated depreciation RM16,000

d)Debit account payable RM4,741; credit gain in foreign exchange RM4,741

Debit depreciation RM12,800; credit accumulated depreciation RM12,800

ANSWER: