Question 3 15 marks You are the chief accountant of the Australian listed company, Delos Ltd, that has a functional currency in A$. Delos Ltd sells goods to a customer in China and has borrowings from a US bank. The company's financial year ends on 30 June. Delos Ltd entered into the following transactions. Delos Ltd sold inventory to a Chinese customer for US$60,000 on 4 April 2021 (FOB shipping contract). The inventory was shipped from Australia on 4/4/21 and delivered to the customer in China on 15/4/21. The Chinese customer paid for its account in two instalments - US$40,000 on 20 April 2021 and US$20,000 on 15 July 2021. The following exchange rates apply: = Date 4 April 2021 15 April 2021 20 April 2021 30 June 2021 15 July 2021 Event Shipping date Inventory received by customer 1st instalment Year end 2nd instalment Spot Rate A$1 = US$0.73 A$1 = US$0.74 A$1 = US $0.75 A$1 = US$0.71 A$1 = US$0.72 On 1 January 2021, Delos Ltd borrowed US$200,000 from an investment bank in the United States, to be repaid on 31/12/21. The borrowing has a fixed rate of interest at 7% p.a., with interest to be paid on 30/6/21 and 31/12/21 in arrears. On 1 April 2021, Delos Ltd entered into a nine-month forward contract to buy US$200,000 in order to hedge against the foreign exchange risk on the US$ loan principal. The following exchange rates apply: Date 1 January 2021 1 April 2021 30 June 2021 31 December 2021 Spot Rate A$1 = US $0.75 A$1 = US $0.74 A$1 = US $0.73 A$1 = US $0.70 Forward Rate (for 31/12/2021) A$1 = US$0.73 A$1 = US$0.72 A$1 = US$0.71 A$1 = US$0.70 Required: i) Prepare the journal entries for Delos Ltd to account for its sale to the Chinese customer and the related receivable. (6 marks) Prepare the journal entries for Delos Ltd to account for its US loan and forward contract (9 marks) Entries should be rounded to the nearest dollar. Assume a 0% discount rate for any fair value calculations. Question 3 15 marks You are the chief accountant of the Australian listed company, Delos Ltd, that has a functional currency in A$. Delos Ltd sells goods to a customer in China and has borrowings from a US bank. The company's financial year ends on 30 June. Delos Ltd entered into the following transactions. Delos Ltd sold inventory to a Chinese customer for US$60,000 on 4 April 2021 (FOB shipping contract). The inventory was shipped from Australia on 4/4/21 and delivered to the customer in China on 15/4/21. The Chinese customer paid for its account in two instalments - US$40,000 on 20 April 2021 and US$20,000 on 15 July 2021. The following exchange rates apply: = Date 4 April 2021 15 April 2021 20 April 2021 30 June 2021 15 July 2021 Event Shipping date Inventory received by customer 1st instalment Year end 2nd instalment Spot Rate A$1 = US$0.73 A$1 = US$0.74 A$1 = US $0.75 A$1 = US$0.71 A$1 = US$0.72 On 1 January 2021, Delos Ltd borrowed US$200,000 from an investment bank in the United States, to be repaid on 31/12/21. The borrowing has a fixed rate of interest at 7% p.a., with interest to be paid on 30/6/21 and 31/12/21 in arrears. On 1 April 2021, Delos Ltd entered into a nine-month forward contract to buy US$200,000 in order to hedge against the foreign exchange risk on the US$ loan principal. The following exchange rates apply: Date 1 January 2021 1 April 2021 30 June 2021 31 December 2021 Spot Rate A$1 = US $0.75 A$1 = US $0.74 A$1 = US $0.73 A$1 = US $0.70 Forward Rate (for 31/12/2021) A$1 = US$0.73 A$1 = US$0.72 A$1 = US$0.71 A$1 = US$0.70 Required: i) Prepare the journal entries for Delos Ltd to account for its sale to the Chinese customer and the related receivable. (6 marks) Prepare the journal entries for Delos Ltd to account for its US loan and forward contract (9 marks) Entries should be rounded to the nearest dollar. Assume a 0% discount rate for any fair value calculations
