QUESTION 2 [24]

On 11 April 2018, Rainbow Limited, a company based in South Africa placed an order for Equipment from Sky Limited, a company based in America at the agreed price of $300 000. On 30 May 2018, the equipment was shipped free on board (FOB) and arrived in South Africa on 5 July 2018. The equipment purchased was installed and available for use on 01 August 2018. Rainbow Limited agreed to pay Sky Limited in two instalments as follows: $ 200 000 on 31 July 2018 $ 100 000 on 15 October 2018 Rainbow Limited has a 30 September year end. Rainbow Limited depreciates equipment at 10% per annum using the straight-line method. The relevant exchange rates are as follows: 1$ = R 11 April 2018 1$ = R1.15 30 May 2018 1$ = R1.25 5 July 2018 1$ = R1.10 31 July 2018 1$ = R1.00 01 August 2018 1$ = R0.55 30 September 2018 1$ = R1.50 15 October 2018 1$ = R1.30 30 September 2019 1$ = R1.25

REQUIRED: Prepare the journal entries of Rainbow Limited for the years ended 30 September 2018 and 30 September 2019