Pantilimon Limited is a UK company that buys and sells sports equipment all over the world....
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Pantilimon Limited is a UK company that buys and sells sports equipment all over the world. The following information is available for the year ending 30 September 2012 when the €/£ exchange rate was €1.52 = £1. (1) On 1 June 2012, Pantilimon Limited purchased delivery vans from a German motor vehicle manufacturer for €100,000 when the exchange rate was €1.53 = £1.00. The purchase contract specified that the payment for the motor vehicles would be made on 30 October 2012 at a pre-specified exchange rate of €1.54 = £1.00. At 30 October 2012 the actual exchange rate was €1.51 = £1.00. (2) On 29 June 2012, Pantilimon Limited purchased some football equipment from a Spanish company for €5,000 when the exchange rate was €1.50 = £1.00. Pantilimon Limited paid for the equipment on 1 November 2012 when the exchange rate was €1.53 = £1.00. (3) Pantilimon Limited regularly sells sports equipment to customers in Italy. On 31 July 2012, they sold equipment to an Italian company for €50,000 as a three month forward contract. The various €/£ exchange rates were: 31 July 2012 31 October 2012 Spot rate 3 month forward rate 1.53 1.56 1.55 1.57 (4) On 1 October 2008 Pantilimon Limited acquired shares in Nastasic Inc., a US company that is also involved in the buying and selling of sports equipment. Pantilimon Limited paid $500,000 on 1 October 2008 to acquire the shares in Nastasic Inc. The acquisition was financed partly by a long-term loan of SFr2,250,000 from a Swiss bank. Pantilimon Limited wishes to offset exchange differences on the loan against exchange differences on the investment. The SFr/$/£ exchange rates from 1 October 2008 were: 1 October 2008 30 September 2009 30 September 2010 30 September 2011 30 September 2012 SFr $ £ 10.2 1.50 1.00 10.7 1.58 1.00 11.4 1.63 1.00 11.1 1.61 10.9 1.52 1.00 1.00 (e) For item (4) above: (ii) Calculate the carrying values of the investment and the loan in the balance sheet of Pantilimon Limited at the end of each of the financial years from 30 September 2009 to 30 September 2012. (8 marks) Show how the net exchange difference arising between the values of the investment and the loan should be dealt with in the financial statements of Pantilimon Limited for each of the financial years from 30 September 2009 to 30 September 2012. (16 marks) (iii) Show how the information regarding the exchange gains or losses on the loan for each of the financial years ending 30 September 2010 and 30 September 2011 should be disclosed in the notes to the financial statements of Pantilimon Limited to comply with IAS 21: The Effects of Changes in Foreign Exchange Rates. (6 marks) Pantilimon Limited is a UK company that buys and sells sports equipment all over the world. The following information is available for the year ending 30 September 2012 when the €/£ exchange rate was €1.52 = £1. (1) On 1 June 2012, Pantilimon Limited purchased delivery vans from a German motor vehicle manufacturer for €100,000 when the exchange rate was €1.53 = £1.00. The purchase contract specified that the payment for the motor vehicles would be made on 30 October 2012 at a pre-specified exchange rate of €1.54 = £1.00. At 30 October 2012 the actual exchange rate was €1.51 = £1.00. (2) On 29 June 2012, Pantilimon Limited purchased some football equipment from a Spanish company for €5,000 when the exchange rate was €1.50 = £1.00. Pantilimon Limited paid for the equipment on 1 November 2012 when the exchange rate was €1.53 = £1.00. (3) Pantilimon Limited regularly sells sports equipment to customers in Italy. On 31 July 2012, they sold equipment to an Italian company for €50,000 as a three month forward contract. The various €/£ exchange rates were: 31 July 2012 31 October 2012 Spot rate 3 month forward rate 1.53 1.56 1.55 1.57 (4) On 1 October 2008 Pantilimon Limited acquired shares in Nastasic Inc., a US company that is also involved in the buying and selling of sports equipment. Pantilimon Limited paid $500,000 on 1 October 2008 to acquire the shares in Nastasic Inc. The acquisition was financed partly by a long-term loan of SFr2,250,000 from a Swiss bank. Pantilimon Limited wishes to offset exchange differences on the loan against exchange differences on the investment. The SFr/$/£ exchange rates from 1 October 2008 were: 1 October 2008 30 September 2009 30 September 2010 30 September 2011 30 September 2012 SFr $ £ 10.2 1.50 1.00 10.7 1.58 1.00 11.4 1.63 1.00 11.1 1.61 10.9 1.52 1.00 1.00 (e) For item (4) above: (ii) Calculate the carrying values of the investment and the loan in the balance sheet of Pantilimon Limited at the end of each of the financial years from 30 September 2009 to 30 September 2012. (8 marks) Show how the net exchange difference arising between the values of the investment and the loan should be dealt with in the financial statements of Pantilimon Limited for each of the financial years from 30 September 2009 to 30 September 2012. (16 marks) (iii) Show how the information regarding the exchange gains or losses on the loan for each of the financial years ending 30 September 2010 and 30 September 2011 should be disclosed in the notes to the financial statements of Pantilimon Limited to comply with IAS 21: The Effects of Changes in Foreign Exchange Rates. (6 marks)
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To calculate the carrying values of the investment and the loan in the balance sheet of Pantilimon Limited at the end of each financial year from 30 September 2009 to 30 September 2012 we need to appl... View the full answer
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
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