Ltd is a South African company that sells computer equipment.
On 3 January 20.21 they ordered laptops for the amount of $20 000
from a company in the United States of America.
The inventories were shipped free on board (FOB) on 10 January 20.21.
The transaction is uncovered.
The laptops arrived in South Africa on 24 January 20.21.
The foreign creditor was paid on 10 March 20.21.
The financial year end of A Ltd is 28 February.
On the settlement date, the foreign creditor will be paid an amount of:
The Exchange Rates for 1USD$=R?
3 January 20.21
R14,65
10 January 20.21
R15,30
24 January 20.21
R15,13
28 February 20.21
R15,07
10 March 20.21
R15,16
a.
R293 000
b.
R306 000
c.
R302 600
d.
R301 400
e.
R303 200
The correct answer is c. R302 600
Calculation:
- On 10 January 20.21, the exchange rate is R15.30. Therefore, the value of the laptops in South African Rand (R) on that date is $20,000 x R15.30 = R306,000.
- Since the financial year end is 28 February 20.21, the exchange rate at that date is R15.07. Therefore, the value of the laptops in R at that date is $20,000 x R15.07 = R301,400.
- The difference in the amount owed by A Ltd to the foreign creditor is R306,000 - R301,400 = R4,600.
- On the settlement date of 10 March 20.21, the exchange rate is R15.16. Therefore, the foreign creditor will be paid $20,000 x R15.16 = R303,200.
- However, since the difference in the amount owed was R4,600, the actual payment to the foreign creditor on the settlement date will be R303,200 - R4,600 = R302,600.