Question: Question 3 : Answer this question in this Word document. Marks: 40 You are the finance director of Mull Ltd. The company specialises in classic
Question 3: Answer this question in this Word document.
Marks: 40
You are the finance director of Mull Ltd. The company specialises in classic foreign vehicles from overseas countries and then selling these vehicles cheaply on the open market. The companys financial year ends on June 30. The company enters into the following transactions during the year.
Required:
Prepare the journal entries to reflect the effects of the following transactions. You should apply the applicable accounting standards.
- The company purchases inventories from Hong Kong for HK$300,000. The order is placed on April 22, 2022, with delivery due by April 30, 2022. Under the conditions of the contract, title to the goods passes to the company on delivery. Payment in respect of these inventories is due in equal instalments on May 31, 2022, June 30, 2022, and final payment on July 31, 2022. The following exchange rates are applicable. Refer to the provide Chart of Accounts for the appropriate account names.
April 22, 2022 HK$8.00 = AUS$1.00
April 30, 2022 HK$8.50 = AUS$1.00
May 31, 2022 HK$8.56 = AUS$1.00
June 30, 2022 HK$8.59 = AUS$1.00
July 31, 2022 HK$8.94 = AUS$1.00
- The company enters into a long-term construction contract with a Japanese company. Under the terms of the contract, the Japanese firm will manufacture an engine diagnosis machine which can be used on all classic cars. The contract is entered into on April 30, 2021, for a fixed price of 5 million. The equipment is delivered on May 31, 2022, subject to a two-month credit period after the date of delivery to ensure that the company is satisfied with the equipment. Payment falls due on July 31, 2022. The following exchange rates are applicable. Refer to the provide Chart of Accounts for the appropriate account names.
April 30, 2021 160 = AUS$1.00
June 30, 2021 160 = AUS$1.00
May 31, 2022 240 = AUS$1.00
June 30, 2022 245 = AUS$1.00
July 31, 2022 260 = AUS$1.00
- The company arranges a US-dollar interest-only loan on January 1, 2022, for US$20 million. The loan is for 10 years at an interest rate of 11.5 per cent per annum. Interest is payable annually. The following exchange rates are applicable. Refer to the provide Chart of Accounts for the appropriate account names.
January 1, 2022 AUS$1.00 = US$0.69
June 30, 2022 AUS$1.00 = US$0.64
Record the taking of the loan on January 1, 2022, and relevant financial year-end entries on June 30, 2022.
- The company has agreed to purchase 10 new handmade sports cars from an English supplier. The official order for the vehicles is placed on January 31, 2022. The contract price is established at 350,000 and delivery takes place on May 31, 2022, as agreed. Payment is due for these vehicles on August 31, 2022. The following exchange rates are applicable. Refer to the provide Chart of Accounts for the appropriate account names.
January 31, 2022 0.49= AUS$1.00
May 31, 2022 0.47 = AUS$1.00
June 30, 2022 0.43= AUS$1.00
August 31, 2022 0.40 = AUS$1.00
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