A Ltd is a South African company that sells computer equipment.
On 3 January 20.21 they ordered laptops for the amount of $20 000
from a company in the United States of America.
The inventories were shipped free on board (FOB) on 10 January 20.21.
The transaction is uncovered.
The laptops arrived in South Africa on 24 January 20.21.
The foreign creditor was paid on 10 March 20.21.
The financial year end of A Ltd is 28 February.
The amount of exchange rate differences that will be recorded in the
Statement of Profit or Loss of A Ltd for the year ended 28 February 20.22 will
be an amount of:
The Exchange Rates for 1USD$=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.
R4 600 loss
b.
R1 200 profit
c.
R 1 800 loss
d.
R1 800 profit
e.
None of the above is correct.
c. R1 800 loss
Calculation:
- Purchase amount in USD$ = $20 000
- Exchange rate on 10 January 20.21 = R15,30
- Amount in ZAR = $20 000 x R15.30 = R306 000
- Payment made on 10 March 20.21
- Exchange rate on 10 March 20.21 = R15.16
- Amount in ZAR = $20 000 x R15.16 = R303 200
- Exchange rate difference = R306 000 - R303 200 = R2800 loss
However, since the laptops arrived on 24 January, any exchange rate differences between 24 January and 28 February would also need to be considered.
- Exchange rate on 24 January = R15.13
- Exchange rate on 28 February = R15.07
So, there was a further loss due to exchange rate differences.
- Amount in ZAR on 24 January = $20 000 x R15.13 = R302 600
- Amount in ZAR on 28 February = $20 000 x R15.07 = R301 400
- Further exchange rate difference = R302 600 - R301 400 = R1200 loss
Total exchange rate difference for the year ended 28 February 20.22 = R2800 + R1200 = R4000 loss
Since payment was made on 10 March, any exchange rate differences after 28 February would not be considered for the year ended 28 February 20.22.
Therefore, the correct answer is c. R1 800 loss.