On 1 March 2020 Holmes Ltd enters into a binding agreement with a New Zealand company, which requires the New Zealand Company to construct an item of machinery for Holmes Ltd. The cost of the machinery is NZ$750,000. The machinery is completed on 1 June 2021 and shipped FOB Auckland on that date. The debt is unpaid at 30 June 2020, which is also Holmes Ltd’s reporting date. The exchange rates at the relevant dates are: 1 March 2020 30 June 2020 1 June 2021 Required: A$1.00 = NZ$1.20 A$1.00 = NZ$1.30 A$1.00 = NZ$1.25 Prepare the journal entries for the above dates, up to 1 June 2021, showing the amount of exchange gain or loss
On 1 March 2020 Holmes Ltd enters into a binding agreement with a New Zealand company, which requires the New Zealand Company to construct an item of machinery for Holmes Ltd. The cost of the machinery is NZ$750,000. The machinery is completed on 1 June 2021 and shipped FOB Auckland on that date. The debt is unpaid at 30 June 2020, which is also Holmes Ltd’s reporting date.
The exchange rates at the relevant dates are:
1 March 2020 30 June 2020 1 June 2021
Required:
A$1.00 = NZ$1.20 A$1.00 = NZ$1.30 A$1.00 = NZ$1.25
Prepare the
Journal Entries:- Journal Entries are the first step to record the business transactions. Journal entries have certain components namely date, title of accounts, reference number and amount to be debited and credited. These provide a base for the preparation of other financial data.
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