Question G

On 1 July 2018 Double Island Ltd enters into an agreement to borrow 2 million from Point plc (UK). Point plc sends the loan money to Double Island Ltds Australian bank account. The loan is for four years and requires the payment of interest at the rate of 8 per cent on 30 June each year. Double Island Ltds reporting date is 30 June. The relevant exchange rates are:

1 July 2018 A$1.00 = UK0.48 30 June 2019 A$1.00 = UK0.50

Required : Provide the necessary journal entries that would be made in the books of Double Island Ltd to account for the above transaction for the year ending 30 June 2019.

Question H

Straya Ltd, an Australian company, acquires all of the shares of Pommie Ltd, a British company, on 1 July 2018. Pommie Ltd had a $nil balance in retained earnings as at the date of acquisition. The financial statements for Pommie Ltd are presented below: Statement of profit or loss and other comprehensive income for Pommie Ltd for the year ending 30 June 2019

Sales 250,000

Cost of sales

- Inventory01 July 2018 (25,000)

Cost of goods manufactured (152,500)

Inventory30 June 2019 27,500 (150,000)

Gross profit 100,000

Selling and administrative expenses (20,000)

Depreciation (30,000)

Profit before tax 50,000

Income tax expense (20 per cent) (10,000)

Profit after tax 40,000

Other comprehensive income -

Total comprehensive income 40,000

Statement of financial position for Pommie Ltd as at 30 June 2019

Cash 34,000

Accounts receivable 46,000

Inventory (cost) 27,500

Plant and equipment 125,000

less Accumulated depreciation (30,000)

Land 50,000

Total assets 252,500

Share capital 150,000

Retained earnings 30,000

Current liabilities

Accounts payable 12,500

Dividends payable 10,000

Non-current liabilities

Long-term bonds 50,000

Total shareholders equity and liabilities 252,500

Additional information

Relevant exchange rates are:

1 July 2018 A$1.00 = 2.00

Plant, equipment and inventory acquired A$1.00 = 2.00

Long-term bonds issued A$1.00 = 1.50

Land acquired A$1.00 = 1.50

Average rate for 2019 financial year A$1.00 = 1.30

Average rate for June 2019 quarter A$1.00 = 1.20

30 June 2019 A$1.00 = 1.10

Plant, equipment and inventory are acquired on 1 July 2018.

There were no monetary assets or liabilities at the commencement of business.

Long-term bonds are issued on 1 August 2018, with the principal to be repaid in full in five years. The bonds are issued in exchange for land, which is to be developed as a factory site.

Inventory on hand at the end of the financial year has been manufactured throughout the June 2019 quarter.

All revenue and expense items are incurred evenly throughout the year.

Required :

Translate the financial statements of Pommie Ltd into Australian dollars in preparation for group consolidation in accordance with AASB 121, assuming that British Pounds are the functional currency of Pommie Ltd and the Australian dollar is the presentation currency of the group.

Question I

On 10 July 2018 Coolum Ltd provides some consulting advice to Florida Inc. (US) for an agreed fee of US$1 million. The amount is paid into the US bank account of Coolum Ltd on 10 July 2018. Coolum Ltd elects to leave the amount in the US bank account, which pays interest each year on 30 June at a rate of 10 per cent. The relevant exchange rates are:

10 July 2018 A$1.00 = US$0.78 30

June 2019 A$1.00 = US$0.75

Required :

Provide the journal entries that would need to be made in the books of Coolum Ltd to account for the above transaction for the year ending 30 June 2019.

Question J

MacAmes Mining Ltd incurs the following exploration and evaluation costs at two sites, Amy and Cam, over the years indicated:

Amy Cam

2017 $2,000 $2,200

2018 $2,500 $3,500

2019 $3,500 $4,300

In relation to the above expenditure, in each year 20 per cent relates to intangible assets and the balance of the expenditure relates to property, plant and equipment. At the end of 2019, oil of an economically recoverable nature is discovered at Amy, but Cam is abandoned.

Following the discovery of oil at Amy, roads and other infrastructure of a fixed nature are constructed in 2020 at a cost of $3,000. Portable buildings, with a life of 10 years, are also put in place. These buildings cost $600.

Production at Amy begins in 2020. It is envisaged that the Amy site would contain 1600 barrels. The sale price of each barrel is $32. The incremental production costs associated with each barrel are $5. During 2020, 400 barrels are extracted, of which 250 are sold.

Assets are amortised or depreciated using the production-output method, except where such assets can be redeployed elsewhere, in which case their individual useful life is used.

Required :

Provide the journal entries for 2017 to 2020 using the area-of-interest method