Homeware Ltd is a South African company that orders $40 000 worth of inventory from the...

 

  

Transcribed Image Text:

Homeware Ltd is a South African company that orders $40 000 worth of inventory from the United states of America on 1 June 2020. On 1 June 2020, Homeware Ltd enters into a forward exchange contract (FEC) to hedge this transaction. On this date the order was a highly probable forecast transaction. The inventory was loaded Free-on-Board on 20 June 2020 and arrived in South Africa on 27 June 2020. The transaction date was 20 June 2020. Homeware Ltd sold 25% of the inventory on 14 July 2020 and then sold the remaining 75% on 3 November 2020. All sales are cash and homeware Ltd uses a profit mark-up of 25% on the cost. Homeware Ltd settled the creditor on 31 July 2020. Homeware Ltd has a year end of 30 June. The relevant exchange rates were as follows: 01-Jun-20 20-Jun-20 27-Jun-20 30-Jun-20 31-Jul-20 Spot $1 Rand 12.50 11.00 13.50 13.40 13.60 FEC rate (expiring 31 July 2020) $1 = Rand 12.50 13.50 13.00 Homeware Ltd treats the hedge of the highly probable forecast transaction as a cashflow hedge and the hedge of a transaction as a fair value hedge. 13.90 N/A The ultimate asset underlying transaction is non-financial (inventory) which initially requires a basis adjustment to Other Comprehensive Income. No journal narrations are required. You must ignore VAT, tax consequences and the time value of money. You may accept that including retrospective effectiveness, are met throughout time periods above. WHEN ENTERING JOURNAL AMOUNTS Do not use: plus signs; commas; spaces; currency signs or alphabetic characters. Enter the amount the correct Debit or Credit Column. Inventory Foreign Creditor FEC Asset/Liability Cash Flow Hedge Reserve OCI Cash Flow Hedge Reserve PL Forex Gain P/L Forex Loss P/L Bank WHEN ENTERING THE CORRECT LEDGER DESCRIPTION Use list of accounts as provided, you may copy and paste them into your answer. The wording shoud be exactly the same as below. Fill in the mssing blanks in general journal of Houseware Ltd, each leg of the journal should have the correct ledger description and amount. (Indicate clearly whether Profit and Loss (P/L) or Equity (OCI) is affected). 20-Jun-20 20-Jun-20DR CR Purchase of inventory from foreign supplier 20-Jun-20 20-Jun-20Dr Cr Accounting for FEC 20-Jun-20 20-Jun-20DR 30-Jun-20 30-Jun-20DR CR Inventory CHH: Adjustment base cost non financial asset 30-Jun-20 30-Jun-20DR 14-Jul-20 14-Jul-20DR CR Foreign Creditor Inventory purchase and recognition of foreign creditor CR Accounting for sale 14-Jul-20 14-Jul-20DR CR Accounting for cost of sale CR Fair value hedge: gain / loss remeasured at year-end 31-Jul-20 31-Jul-20DR CR Accounting for creditor Ledger Account Description Inventory 31-Jul-20 31-Jul-20Dr Cr Accounting for FEC Ledger Account Description FEC Asset/Liability 31-Jul-20 31-Jul-20Dr Ledger Account Description Cr Cr Settlement Ledger Account Description Ledger Account Description FEC Asset/Liability Ledger Account Description Bank Sales P/L Ledger Account Description Cost of sales P/L Ledger Account Description Foreign Creditor Ledger Account Description FEC Asset/Liability Ledger Account Description Foreign Creditor FEC Asset/Liability Dr Dr Dr Dr Dr Dr Dr Dr Dr Dr Using the same information as provided for the above journal. WHEN ENTERING THE DISCLOSURE AMOUNTS BELOW: Do not use: plus signs; commas; spaces; currency signs or alphabetic characters. No comparrative figures are regiured. EXTRACT OF STATEMENT OF FINANCIAL POSITION OF HOMEWARE LTD AS AT 30 JUNE 2020 ASSETS Current assets Inventory FEC asset/liability Equity and Liability. Liabilities Foreign Creditor Equity Cash Flow Hedge Reserve OCI 2020 R Homeware Ltd is a South African company that orders $40 000 worth of inventory from the United states of America on 1 June 2020. On 1 June 2020, Homeware Ltd enters into a forward exchange contract (FEC) to hedge this transaction. On this date the order was a highly probable forecast transaction. The inventory was loaded Free-on-Board on 20 June 2020 and arrived in South Africa on 27 June 2020. The transaction date was 20 June 2020. Homeware Ltd sold 25% of the inventory on 14 July 2020 and then sold the remaining 75% on 3 November 2020. All sales are cash and homeware Ltd uses a profit mark-up of 25% on the cost. Homeware Ltd settled the creditor on 31 July 2020. Homeware Ltd has a year end of 30 June. The relevant exchange rates were as follows: 01-Jun-20 20-Jun-20 27-Jun-20 30-Jun-20 31-Jul-20 Spot $1 Rand 12.50 11.00 13.50 13.40 13.60 FEC rate (expiring 31 July 2020) $1 = Rand 12.50 13.50 13.00 Homeware Ltd treats the hedge of the highly probable forecast transaction as a cashflow hedge and the hedge of a transaction as a fair value hedge. 13.90 N/A The ultimate asset underlying transaction is non-financial (inventory) which initially requires a basis adjustment to Other Comprehensive Income. No journal narrations are required. You must ignore VAT, tax consequences and the time value of money. You may accept that including retrospective effectiveness, are met throughout time periods above. WHEN ENTERING JOURNAL AMOUNTS Do not use: plus signs; commas; spaces; currency signs or alphabetic characters. Enter the amount the correct Debit or Credit Column. Inventory Foreign Creditor FEC Asset/Liability Cash Flow Hedge Reserve OCI Cash Flow Hedge Reserve PL Forex Gain P/L Forex Loss P/L Bank WHEN ENTERING THE CORRECT LEDGER DESCRIPTION Use list of accounts as provided, you may copy and paste them into your answer. The wording shoud be exactly the same as below. Fill in the mssing blanks in general journal of Houseware Ltd, each leg of the journal should have the correct ledger description and amount. (Indicate clearly whether Profit and Loss (P/L) or Equity (OCI) is affected). 20-Jun-20 20-Jun-20DR CR Purchase of inventory from foreign supplier 20-Jun-20 20-Jun-20Dr Cr Accounting for FEC 20-Jun-20 20-Jun-20DR 30-Jun-20 30-Jun-20DR CR Inventory CHH: Adjustment base cost non financial asset 30-Jun-20 30-Jun-20DR 14-Jul-20 14-Jul-20DR CR Foreign Creditor Inventory purchase and recognition of foreign creditor CR Accounting for sale 14-Jul-20 14-Jul-20DR CR Accounting for cost of sale CR Fair value hedge: gain / loss remeasured at year-end 31-Jul-20 31-Jul-20DR CR Accounting for creditor Ledger Account Description Inventory 31-Jul-20 31-Jul-20Dr Cr Accounting for FEC Ledger Account Description FEC Asset/Liability 31-Jul-20 31-Jul-20Dr Ledger Account Description Cr Cr Settlement Ledger Account Description Ledger Account Description FEC Asset/Liability Ledger Account Description Bank Sales P/L Ledger Account Description Cost of sales P/L Ledger Account Description Foreign Creditor Ledger Account Description FEC Asset/Liability Ledger Account Description Foreign Creditor FEC Asset/Liability Dr Dr Dr Dr Dr Dr Dr Dr Dr Dr Using the same information as provided for the above journal. WHEN ENTERING THE DISCLOSURE AMOUNTS BELOW: Do not use: plus signs; commas; spaces; currency signs or alphabetic characters. No comparrative figures are regiured. EXTRACT OF STATEMENT OF FINANCIAL POSITION OF HOMEWARE LTD AS AT 30 JUNE 2020 ASSETS Current assets Inventory FEC asset/liability Equity and Liability. Liabilities Foreign Creditor Equity Cash Flow Hedge Reserve OCI 2020 R

Answer rating: 100% (QA)

General Journal Date Description Debit Credit 1Jun20 Inventory 4000000 000 1Jun20 Foreign Creditor 0... View the full answer