1. On 17 May an Australian company acquires goods on credit from a supplier in Rome. Their goods are shipped from Rome 17 May.

The cost of the goods is 675,000 and the debt remains unpaid on 31 December. On 17 May the exchange rate is A$1.00 = 0.65.

On the 31 December it is A$1.00 = 0.67. Hence the value of the Australian dollar has decreased relative to the Euro. The Australian companies reporting date is 31 December.

Required:

Provide the accounting entries necessary to account for the above purchase by the Australian company for the year ending 31 December in accordance with the requirement of AASB 121. Show all workings. (5 marks)

[Answer and show workings here]

2. On the 10 November, a company in Sydney sells advanced computer chips to a company in the USA. The sales price is USD1.2M and the exchange rate on this date is AUD1=USD0.77. Settlement of the invoice is made by the US company in US dollars on 15 December when the rate of exchange is AUD1=USD 0.73

Required:

Give the entries in the books of the Australian company on the date of sale and date of settlement, prepared in accordance with the requirement of AASB 121. Show all workings. (5 marks)

[Answer and show workings here]