(a) On 1 July 2022, Lawrence Ltd enters into an arrangement with a US bank-Peter Bank-to...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
(a) On 1 July 2022, Lawrence Ltd enters into an arrangement with a US bank-Peter Bank-to borrow US$3,000,000. The term of the loan is 5 years with interest payable annually in arrears on 30 June at the rate of 10 per cent. The exchange rate information is: 1 July 2022 30 June 2023 A$1 = US$0.62 A$1 = US$0.48 Required: What journal entries are required in Lawrence Ltd's books for 1 July 2022 and 30 June 2023 in accordance with AASB 121 'The Effects of Changes in Foreign Exchange Rates'? Round to the nearest dollar. (Narrations are not required). (b) Ozzie Hat Ltd manufactures farm-style hats in Australia. It has a subsidiary in the United States (US). The US subsidiary purchases hats from its parent entity, Ozzie Hat. The sole activity of the US subsidiary is to distribute the hats manufactured by Ozzie Hat Ltd, on behalf of Ozzie Hat. The contracts for the purchase of hats by the US subsidiary is denominated in AUD, while the selling price of the hats sold by the US subsidiary is denominated in USD. In addition, the retail operations of the US subsidiary, incur various operating costs in USD, including salaries, rent, insurance, etc. Required: Determine and explain the choice of functional currency for the US subsidiary in accordance with AASB 121 'The Effects of Changes in Foreign Exchange Rates'. Answer here: Part (a) Date Account Debit ($) Credit ($) Part (b) (a) On 1 July 2022, Lawrence Ltd enters into an arrangement with a US bank-Peter Bank-to borrow US$3,000,000. The term of the loan is 5 years with interest payable annually in arrears on 30 June at the rate of 10 per cent. The exchange rate information is: 1 July 2022 30 June 2023 A$1 = US$0.62 A$1 = US$0.48 Required: What journal entries are required in Lawrence Ltd's books for 1 July 2022 and 30 June 2023 in accordance with AASB 121 'The Effects of Changes in Foreign Exchange Rates'? Round to the nearest dollar. (Narrations are not required). (b) Ozzie Hat Ltd manufactures farm-style hats in Australia. It has a subsidiary in the United States (US). The US subsidiary purchases hats from its parent entity, Ozzie Hat. The sole activity of the US subsidiary is to distribute the hats manufactured by Ozzie Hat Ltd, on behalf of Ozzie Hat. The contracts for the purchase of hats by the US subsidiary is denominated in AUD, while the selling price of the hats sold by the US subsidiary is denominated in USD. In addition, the retail operations of the US subsidiary, incur various operating costs in USD, including salaries, rent, insurance, etc. Required: Determine and explain the choice of functional currency for the US subsidiary in accordance with AASB 121 'The Effects of Changes in Foreign Exchange Rates'. Answer here: Part (a) Date Account Debit ($) Credit ($) Part (b)
Expert Answer:
Answer rating: 100% (QA)
Part a Journal entries for Lawrence Ltd in accordance with AASB 121 1 July 2022 Dr Loan payable USD 3000000 Cr Cash AUD 1860000 Cr Foreign exchange gain 1140000 30 June 2023 Dr Interest expense AUD 60... View the full answer
Related Book For
Understanding Financial Accounting
ISBN: 9781119406921
2nd Canadian Edition
Authors: Christopher D. Burnley
Posted Date:
Students also viewed these accounting questions
-
At December 3 1 , 2 0 2 0 , Russia Inc. has outstanding the following shares: 5 , 0 0 0 , $ 3 . 2 0 , no par value preferred shares with a carrying value of $ 2 0 0 , 0 0 0 , and 4 0 , 0 0 0 no par...
-
On 1 July 2022 Supertubes Ltd issues $50 million of convertible bonds to Magnatubes Ltd. The bonds have a life of three years, a face value of $10.00 each, and they offer interest, payable at the end...
-
The overall procedures adopted by a business to safeguard its assets, promote the reliability of accounting data and encourage compliance with management policies are: . internal controls. b. bank...
-
Given the following table of assets held at death, how much is the probate estate worth? Asset Value (millions) Notes Investments $7 Retirement Account $6 Named Beneficiary Residence $4 Joint Tenancy...
-
A nursery has $40,000 of inventory in dogwood trees and red maple trees. The profit on a dogwood tree is 25% and the profit on a red maple tree is 17%. The profit for the entire stock is 20%. How...
-
Arrow Air is a regional East Coast airline. It has collected data for the percentage of available seats occupied on its flights for four quarters (1) JanuaryMarch (2) AprilJune (3) JulySeptember (4)...
-
Explain the difference between a financial forecast and a financial projection.
-
Trattner Company had a beginning inventory on January 1 of 100 units of Product SXL at a cost of $20 per unit. During the year, purchases were: Mar. 15 300 units at $23 Sept. 4 ... 290 units at $28...
-
himself and members of his family who live with him, when he asks you to prepare his 2022 tax return. Mr. Jennings provides you with the following medical expenses and additional information for...
-
The Economic Order Quantity (EOQ) model is a classical model used for controlling inventory and satisfying demand. Costs included in the model are holding cost per unit, ordering cost and the cost of...
-
A student is willingly to design novel and more active fluoroquinolone type antibiotics. Accordingly; |- The esterification of position 3 carboxylic acid on the quinolone ring Il- The replacement of...
-
What have researchers found about the definition of what strategic management accounting means?
-
Describe the main contents of a business plan for presenting to a bank providing finance for a small business.
-
What are the most likely ways to emerge as a group leader?
-
What is incremental analysis?
-
What are bankers looking for when they evaluate working capital?
-
3. (a) Analyze the frame shown in Fig. 3 by the moment distribution method and draw bending moment diagram. 15 ,15 KN A 50 kN/m 21 5 m I D Fig. 3 I 1 m C 4 m
-
Burberrys competitive advantage is through its differentiation strategy. What risk should Burberry remain aware of?
-
Moksh Ltd. started business on January 1, 2020. The following transactions occurred in 2020: 1. On January 1, the company received $700,000 when it issued 10,000 common shares. 2. On January 1, the...
-
The following trial balance before adjustments is for Snowcrest Ltd. on December 31, 2020: Data for adjusting entries: 1. As at December 31, 2020, 80% of the wages that had been paid in advance to...
-
Park Avenue Tire Company has been operating in Winnipeg for more than 30 years and has a very loyal customer base. The company sells and installs tires and the owners pride themselves on the...
-
If the internal energy of a substance is considered to be a function of temperature and volume, then show that \[ d U=C_{V} d T+\left(\frac{T \beta}{\alpha}-P ight) d V \]
-
For an isothermal reversible change of the system \[ -\Delta A_{T}=W_{\max } \] explain the significance of the preceding equation in the light of Helmholtz free energy.
-
What are free energy functions? Classify them. Mention the importance of free energy functions in the analysis of thermodynamic processes.
Study smarter with the SolutionInn App