Question (13 marks) (24 minutes) Bake Away Ltd, a company located in Johannesburg, South Africa, produces and sells biscuits, cakes, pastries, cookies and a variety of ready-mix cake products. Bake Away Ltd is listed on the JSE and has a 30 June year end. The details of one of the companys assets are as follows: Baking equipment On 1 July 20x21, management ordered baking equipment from an American-based supplier at the cost of $55 900. On 1 August 20x21 the baking equipment was shipped free on board (FOB) and Bake Away Ltd settled $25 000 of the cost on this date. The remainder of the outstanding amount is payable to the supplier on 31 July 20x22. The baking equipment was available for use as intended by management, and was brought into use on 1 October 20x21. On the acquisition date, an estimated useful life of six years and a residual value of Rnil was allocated to the baking equipment. The following exchange rates are applicable: Date Spot rate $1 = R 1 July 20x21 .................................................................................................................. 14,21 1 August 20x21 ............................................................................................................. 14,36 1 October 20x21 ........................................................................................................... 14,45 30 June 20x22 .............................................................................................................. 14,55 The junior accountant of Bake Away Ltd processed only the following two journal entries to account for the acquisition of the baking equipment: Debit R Credit R Journal 1 1 July 20x21 Equipment (SFP) 794 339 Trade payables (SFP) ($55 900 x 14,21) 794 339 Recognition of acquisition of equipment. Journal 2 1 August 20x21 Trade payables (SFP) 359 000 Bank (SFP) ($25 000 x 14,36) 359 000 Recognise payment made to American supplier The following is an extract from the accounting policies of Bake Away Ltd: Equipment is accounted for in accordance with the cost model. Depreciation of assets is provided for according to the straight-line method over the estimated useful lives of the assets. Assumptions All amounts are material. Ignore all tax implications. REQUIRED: Marks Use Microsoft Word to record your response to the following task: Discuss if the two journal entries recorded by the junior accountant in the accounting records of Bake Away Ltd for the year ended 30 June 20x22 are correct; and complete to account for the baking equipment and related creditor, only in accordance with the requirements of IAS 21, The effects of changes in foreign exchange rates. Support your discussion with: reasons; calculations Adjusting and/or additional journal entries (if any) Use the table function available in Microsoft Word to replicate the following table to include any adjusting and/or additional journal entries in your response. Journal number Account names Debit Credit R R Communication mark logical argument 1 10 1 1