Question

Topic 5: Accounting for foreign currency transactions MyBeauty Ltd is an Australian company which specialises in manufacturing and distributing health and beauty products to both local and international clients. The company has a reporting period which ends on 30 June and the Australian dollar is the functional and presentation currency. For the financial year ending 30 June 2019, MyBeauty LTd has entered into two independent transactions denominated in foreign currency as follows. Transaction A MyBeauty Ltd sells some goods on credit to Bristol Industries, a British company. The contract, dated 1 January 2019, is denominated in United Kingdom pounds and the contract amounts to £150,000. Bristol Industries settles the contract on 29 January 2019. The relevant exchange rates are as follows: 3 January 2019 A$1.00 = £0.5684 29 January 2019 A$1.00 = £0.5892 Transaction B On 1 July 2017, MyBeauty Ltd entered into a loan denominated in Euros, borrowing €300,000 from a European Bank. The following summarises the bank loan statements over the period 1 July 2017 to 30 June 2019. Date Details Amount Balances € € 1 July 2017 Loan contract – principal 300,000 300,000 DR 30 June 2018 Interest 33,000 333,000 DR 30 June 2019 Interest 37,000 370,000 DR The relevant exchange rates are as follows: 1 July 2017 A$1.00 = €0.6545 30 June 2018 A$1.00 = €0.6045 30 June 2019 A$1.00 = €0.6419 Required: In accordance with AASB 121, prepare all relevant journal entries of MyBeauty Ltd to account for the above transactions for the financial years ending 30 June 2018 and 2019, where relevant.

Answer 1