Question 4 (15 marks) You are the finance director of the Australian listed company, BHP Billiton Ltd that has a functional currency in A$. The company is an importer of goods from overseas markets. The company's financial year ends on 30 June 2020. The company entered the following transactions during the year. i, BHP Billiton Ltd purchased inventories from a Hongkong supplier for HKD$378,000. The title to the goods passes to the company on FOB destination. The payment for the inventories is due in equal instalments. The following exchange rates are applicable: Date 23 April 2020 30 April 2020 31 May 2020 30 June 2020 31 July 2020 Particulars Date of order for inventories Date of delivery for inventories 1st payment of HKD $126,000 2nd payment of HKD $126,000 3rd payment of HKD $126,000 Exchange rate A$1 = HKD $8.90 A$1 = HKD $9.00 A$1 = HKD $9.06 A$1 = HKD $9.09 A$1 = HKD $9.42 ii. BHP Billiton Ltd arranged interest-only borrowings on 1 January 2020 for US$3,000,000. The borrowings have a 5-year term, and interest is paid half-yearly at the rate of 6.5% p.a. BHP Billiton Ltd took out a 6-month forward exchange contract on 1 January 2020 as a hedge against the initial interest payment due. The following exchange rates are applicable: Date Spot rate Forward rate (for 30/06/2020) A$1 = US$0.75 A$1 = US$0.65 1 January 2020 30 June 2020 A$1 = US$0.80 A$1 = US$0.65 Required: a) Prepare the journal entries for BHP Billiton Ltd to account for its purchases from the Hongkong supplier and the related payable. (7 marks) b) Prepare the journal entries for BHP Billiton Ltd to record the borrowing transaction, and the borrowing costs expense and the forward contract. (8 marks) (Entries should be rounded to the nearest dollar. Assume a 0% discount rate for any fair value calculations.) Question 4 (15 marks) You are the finance director of the Australian listed company, BHP Billiton Ltd that has a functional currency in A$. The company is an importer of goods from overseas markets. The company's financial year ends on 30 June 2020. The company entered the following transactions during the year. i, BHP Billiton Ltd purchased inventories from a Hongkong supplier for HKD$378,000. The title to the goods passes to the company on FOB destination. The payment for the inventories is due in equal instalments. The following exchange rates are applicable: Date 23 April 2020 30 April 2020 31 May 2020 30 June 2020 31 July 2020 Particulars Date of order for inventories Date of delivery for inventories 1st payment of HKD $126,000 2nd payment of HKD $126,000 3rd payment of HKD $126,000 Exchange rate A$1 = HKD $8.90 A$1 = HKD $9.00 A$1 = HKD $9.06 A$1 = HKD $9.09 A$1 = HKD $9.42 ii. BHP Billiton Ltd arranged interest-only borrowings on 1 January 2020 for US$3,000,000. The borrowings have a 5-year term, and interest is paid half-yearly at the rate of 6.5% p.a. BHP Billiton Ltd took out a 6-month forward exchange contract on 1 January 2020 as a hedge against the initial interest payment due. The following exchange rates are applicable: Date Spot rate Forward rate (for 30/06/2020) A$1 = US$0.75 A$1 = US$0.65 1 January 2020 30 June 2020 A$1 = US$0.80 A$1 = US$0.65 Required: a) Prepare the journal entries for BHP Billiton Ltd to account for its purchases from the Hongkong supplier and the related payable. (7 marks) b) Prepare the journal entries for BHP Billiton Ltd to record the borrowing transaction, and the borrowing costs expense and the forward contract. (8 marks) (Entries should be rounded to the nearest dollar. Assume a 0% discount rate for any fair value calculations.)
