QUESTION 5 TOTAL 15 marks You are the chief accountant of an Australian listed company, Faludi Ltd, that has a functional currency in A$. Faludi Ltd purchases inventory from a supplier in Japan and borrows funds from a US bank. The company's financial year ends on 30 June. Faludi Ltd entered into the following transactions. Faludi Ltd purchased inventory from its Japanese supplier for 50,000 on 24 May 2018 (FOB shipping contract). The inventory was shipped from Japan on 24 May 2018 and reached Faludi Ltd's warehouse on 16 June 2018. Faludi Ltd paid for the purchase on 2 July 2018. The following exchange rates apply. Date 24 May 2018 16 June 2018 30 June 2018 2 July 2018 Spot Rate A$1 = 0.80 A$1 = 0.74 A$1 = 0.75 A$1 = 0.76 On 1 January 2018, Faludi Ltd borrowed US$500,000 from an investment bank in the United States, to be repaid on 31 December 2018. The borrowing has a fixed rate of interest at 6% p.a., with interest to be paid on 30 June 2018 and 31 December 2018 in arrears. Assume a discount rate of 0% for fair value calculations. On 1 April 2018, Faludi Ltd entered into a nine month forward contract to buy US$500,000 in order to hedge against the foreign exchange risk on the US$ loan principal. The following exchange rates apply. Date Spot Rate 1 January 2018 1 April 2018 30 June 2018 31 December 2018 A$1 = US$0.75 A$1 = US$0.74 A$1 = US$0.73 A$1 = US$0.70 Forward Rate (for 31/12/2018) A$1 = US$0.73 A$1 = US$0.72 A$1 = US$0.71 A$1 = US$0.70 Required: a) Prepare the journal entries related to the purchase of inventory from the Japanese supplier and the associated payment. (4 marks) b) Prepare the journal entries for Faludi Ltd to account for its US loan and forward contract. (11 marks) Show dates and narrations. Tax entries not required. Round entries to the nearest dollar. QUESTION 5 TOTAL 15 marks You are the chief accountant of an Australian listed company, Faludi Ltd, that has a functional currency in A$. Faludi Ltd purchases inventory from a supplier in Japan and borrows funds from a US bank. The company's financial year ends on 30 June. Faludi Ltd entered into the following transactions. Faludi Ltd purchased inventory from its Japanese supplier for 50,000 on 24 May 2018 (FOB shipping contract). The inventory was shipped from Japan on 24 May 2018 and reached Faludi Ltd's warehouse on 16 June 2018. Faludi Ltd paid for the purchase on 2 July 2018. The following exchange rates apply. Date 24 May 2018 16 June 2018 30 June 2018 2 July 2018 Spot Rate A$1 = 0.80 A$1 = 0.74 A$1 = 0.75 A$1 = 0.76 On 1 January 2018, Faludi Ltd borrowed US$500,000 from an investment bank in the United States, to be repaid on 31 December 2018. The borrowing has a fixed rate of interest at 6% p.a., with interest to be paid on 30 June 2018 and 31 December 2018 in arrears. Assume a discount rate of 0% for fair value calculations. On 1 April 2018, Faludi Ltd entered into a nine month forward contract to buy US$500,000 in order to hedge against the foreign exchange risk on the US$ loan principal. The following exchange rates apply. Date Spot Rate 1 January 2018 1 April 2018 30 June 2018 31 December 2018 A$1 = US$0.75 A$1 = US$0.74 A$1 = US$0.73 A$1 = US$0.70 Forward Rate (for 31/12/2018) A$1 = US$0.73 A$1 = US$0.72 A$1 = US$0.71 A$1 = US$0.70 Required: a) Prepare the journal entries related to the purchase of inventory from the Japanese supplier and the associated payment. (4 marks) b) Prepare the journal entries for Faludi Ltd to account for its US loan and forward contract. (11 marks) Show dates and narrations. Tax entries not required. Round entries to the nearest dollar. QUESTION 5 TOTAL 15 marks You are the chief accountant of an Australian listed company, Faludi Ltd, that has a functional currency in A$. Faludi Ltd purchases inventory from a supplier in Japan and borrows funds from a US bank. The company's financial year ends on 30 June. Faludi Ltd entered into the following transactions. Faludi Ltd purchased inventory from its Japanese supplier for 50,000 on 24 May 2018 (FOB shipping contract). The inventory was shipped from Japan on 24 May 2018 and reached Faludi Ltd's warehouse on 16 June 2018. Faludi Ltd paid for the purchase on 2 July 2018. The following exchange rates apply. Date 24 May 2018 16 June 2018 30 June 2018 2 July 2018 Spot Rate A$1 = 0.80 A$1 = 0.74 A$1 = 0.75 A$1 = 0.76 On 1 January 2018, Faludi Ltd borrowed US$500,000 from an investment bank in the United States, to be repaid on 31 December 2018. The borrowing has a fixed rate of interest at 6% p.a., with interest to be paid on 30 June 2018 and 31 December 2018 in arrears. Assume a discount rate of 0% for fair value calculations. On 1 April 2018, Faludi Ltd entered into a nine month forward contract to buy US$500,000 in order to hedge against the foreign exchange risk on the US$ loan principal. The following exchange rates apply. Date Spot Rate 1 January 2018 1 April 2018 30 June 2018 31 December 2018 A$1 = US$0.75 A$1 = US$0.74 A$1 = US$0.73 A$1 = US$0.70 Forward Rate (for 31/12/2018) A$1 = US$0.73 A$1 = US$0.72 A$1 = US$0.71 A$1 = US$0.70 Required: a) Prepare the journal entries related to the purchase of inventory from the Japanese supplier and the associated payment. (4 marks) b) Prepare the journal entries for Faludi Ltd to account for its US loan and forward contract. (11 marks) Show dates and narrations. Tax entries not required. Round entries to the nearest dollar. QUESTION 5 TOTAL 15 marks You are the chief accountant of an Australian listed company, Faludi Ltd, that has a functional currency in A$. Faludi Ltd purchases inventory from a supplier in Japan and borrows funds from a US bank. The company's financial year ends on 30 June. Faludi Ltd entered into the following transactions. Faludi Ltd purchased inventory from its Japanese supplier for 50,000 on 24 May 2018 (FOB shipping contract). The inventory was shipped from Japan on 24 May 2018 and reached Faludi Ltd's warehouse on 16 June 2018. Faludi Ltd paid for the purchase on 2 July 2018. The following exchange rates apply. Date 24 May 2018 16 June 2018 30 June 2018 2 July 2018 Spot Rate A$1 = 0.80 A$1 = 0.74 A$1 = 0.75 A$1 = 0.76 On 1 January 2018, Faludi Ltd borrowed US$500,000 from an investment bank in the United States, to be repaid on 31 December 2018. The borrowing has a fixed rate of interest at 6% p.a., with interest to be paid on 30 June 2018 and 31 December 2018 in arrears. Assume a discount rate of 0% for fair value calculations. On 1 April 2018, Faludi Ltd entered into a nine month forward contract to buy US$500,000 in order to hedge against the foreign exchange risk on the US$ loan principal. The following exchange rates apply. Date Spot Rate 1 January 2018 1 April 2018 30 June 2018 31 December 2018 A$1 = US$0.75 A$1 = US$0.74 A$1 = US$0.73 A$1 = US$0.70 Forward Rate (for 31/12/2018) A$1 = US$0.73 A$1 = US$0.72 A$1 = US$0.71 A$1 = US$0.70 Required: a) Prepare the journal entries related to the purchase of inventory from the Japanese supplier and the associated payment. (4 marks) b) Prepare the journal entries for Faludi Ltd to account for its US loan and forward contract. (11 marks) Show dates and narrations. Tax entries not required. Round entries to the nearest dollar