Question 3: (21 marks)

Part A: (9 marks)

Australia Ltd acquired a US subsidiary, Eathis Ltd on 1 January 2010. The equity balances of Eathis Ltd on acquisition are as follows:

Share Capital US$300 000 Retained Profits US$75 000

Prevailing exchange rates between the A$ and the US$ are as follows:

1 January 2010

Average exchange rate for 2010 Ending Inventory Acquired

31 December 2010

A$ US$ 1 0.75 1 0.80 1 0.84 1 0.90

Required: (use the Table provided below)

Complete the table below to translate the trial balance of Eathis Ltd into Australian dollars assuming

that US$ is the functional currency for Eathis Ltd.

Part B: (12 marks)

On 1 July 2012, G Ltd, an Australian company, borrows US$2 million at 10% from a US firm, repayable in US dollars after 5 years. Although G Ltd trades predominantly within Australia, the loan is not in such favourable terms as could be obtained within Australia.

D Ltd, an Australian company, borrows A$2 million from an Australian bank at a fixed rate of 12% for 5 years at the same time. D Ltd has a number of receivables denominated in US dollars.

To attain perceived benefits, both parties decide to swap their loan interest and principal obligations on the same date that they take out the loans, which is 1 July 2012. Under the swap terms, both agree to take control of the other partys principal and interest obligations. The relevant exchange rates are:

1 July 2012 A$1 = US$0.98 30 June 2013 A$1 = US$0.95

Following the swap, G Ltds foreign currency principal obligation is effectively fixed at the rate in place at the time of the swap.

Required: [use the space provided below]

Provide journal entries in the book of G Ltd (use rounding $ amount).

Question 3: (21 marks) Part A: (9 marks) Australia Ltd acquired a US subsidiary, Eathis Ltd on 1 January 2010. The equity balances of Eathis Ltd on acquisition are as follows: Share Capital Retained Profits USS300 000 USS75 000 Prevailing exchange rates between the AS and the USS are as follows: 1 January 2010 Average exchange rate for 2010 Ending Inventory Acquired 31 December 2010 AS USS 0.75 0.80 0.84 0.90 Required: (use the Table provided below) Complete the table below to translate the trial balance of Eathis Ltd into Australian dollars assuming that USS is the functional currency for Eathis Ltd. 1 January 2010 Average exchange rate for 2010 Ending Inventory Acquired 31 December 2010 AS USs 0.75 10.80 10.84 1 0.90 Required: (use the Table provided below) Complete the table below to translate the trial balance of Eathis Ltd into Australian dollars assuming that USS is the functional currency for Eathis Ltd. USS 000 Rate AS 000 27.0 dr Accounts Receivable Inventory Land Equipment (net) Accounts Payable Tax Payable Loan Payable 153.0 dr 27.0 dr 180.0 dr 297.0 dr 180.0 dr 45.0 cr 360.0 cr 300.0 cr 75.0 cr Share Capital Retained Profits 1/1/10 FX Translation Reserve 320.0 cr 104.0 dr 42.0 cr Closing Inventory Cash Expenses Depreciation Income Tax Expense 80.0 dr 56.0 dr 8.0 dr AFM311, Trimester 1 2014 Part B: (12 marks) On 1 July 2012, G Ltd, an Australian company, borrows US$2 million at 10% from a US firm, repayable in US dollars after 5 years. Although G Ltd trades predominantly within Australia, the loan is not in such favourable terms as could be obtained within Australia. D Ltd, an Australian company, borrows A$2 million from an Australian bank at a fixa rate of 12% for 5 years at the same time. D Ltd has a number of receivables denominated in US dollars. To attain perceived benefits, both parties decide to swap their loan interest and principal obligations on the same date that they take out the loans, which is 1 July 2012. Under the swap terms, both agree to take control of the other party's principal and interest obligations. The relevant exchange rates are 1 July 2012 30 June 2013 ASI # US$0.98 AS1 USS0.95 Following the swap, G Ltd's foreign currency principal obligation is effectively fixed at the rate in place at the time of the swap. Required: [use the space provided below] Provide joumal entries in the book of G Ltd (use rounding S amount). Question 3: (21 marks) Part A: (9 marks) Australia Ltd acquired a US subsidiary, Eathis Ltd on 1 January 2010. The equity balances of Eathis Ltd on acquisition are as follows: Share Capital Retained Profits USS300 000 USS75 000 Prevailing exchange rates between the AS and the USS are as follows: 1 January 2010 Average exchange rate for 2010 Ending Inventory Acquired 31 December 2010 AS USS 0.75 0.80 0.84 0.90 Required: (use the Table provided below) Complete the table below to translate the trial balance of Eathis Ltd into Australian dollars assuming that USS is the functional currency for Eathis Ltd. 1 January 2010 Average exchange rate for 2010 Ending Inventory Acquired 31 December 2010 AS USs 0.75 10.80 10.84 1 0.90 Required: (use the Table provided below) Complete the table below to translate the trial balance of Eathis Ltd into Australian dollars assuming that USS is the functional currency for Eathis Ltd. USS 000 Rate AS 000 27.0 dr Accounts Receivable Inventory Land Equipment (net) Accounts Payable Tax Payable Loan Payable 153.0 dr 27.0 dr 180.0 dr 297.0 dr 180.0 dr 45.0 cr 360.0 cr 300.0 cr 75.0 cr Share Capital Retained Profits 1/1/10 FX Translation Reserve 320.0 cr 104.0 dr 42.0 cr Closing Inventory Cash Expenses Depreciation Income Tax Expense 80.0 dr 56.0 dr 8.0 dr AFM311, Trimester 1 2014 Part B: (12 marks) On 1 July 2012, G Ltd, an Australian company, borrows US$2 million at 10% from a US firm, repayable in US dollars after 5 years. Although G Ltd trades predominantly within Australia, the loan is not in such favourable terms as could be obtained within Australia. D Ltd, an Australian company, borrows A$2 million from an Australian bank at a fixa rate of 12% for 5 years at the same time. D Ltd has a number of receivables denominated in US dollars. To attain perceived benefits, both parties decide to swap their loan interest and principal obligations on the same date that they take out the loans, which is 1 July 2012. Under the swap terms, both agree to take control of the other party's principal and interest obligations. The relevant exchange rates are 1 July 2012 30 June 2013 ASI # US$0.98 AS1 USS0.95 Following the swap, G Ltd's foreign currency principal obligation is effectively fixed at the rate in place at the time of the swap. Required: [use the space provided below] Provide joumal entries in the book of G Ltd (use rounding S amount)