On 1 June 20X0, Led Pty Ltd sold a machine to an overseas company for ¥3,000,000. Payment was received on 14 July 20X0. Led’s reporting date is 30 June, and its functional currency is A$. The risks and benefits relating to the machine transferred to the purchaser on delivery. The following exchange rate applied:
1 June 20X0 $\quad$$\quad$¥1.00 = $\quad$ A$0.20
30 June 20X0$\quad$$\quad$¥1.00 = $\quad$A$0.18
14 July 20X0$\quad$$\quad$¥1.00 = $\quad$A$0.19
-What was the foreign currency exchange difference recognised for the reporting period ending 30 June 20X0 by Led Ltd on the transaction?
A)$30,000 FC exchange difference revenue
B)$30,000 FC exchange difference expense
C)$60,000 FC exchange difference revenue
D)$60,000 FC exchange difference expense

Question

On 1 June 20X0, Led Pty Ltd sold a machine to an overseas company for ¥3,000,000. Payment was received on 14 July 20X0. Led’s reporting date is 30 June, and its functional currency is A$. The risks and benefits relating to the machine transferred to the purchaser on delivery. The following exchange rate applied:
1 June 20X0 $\quad$$\quad$¥1.00	= $\quad$ A$0.20
30 June 20X0$\quad$$\quad$¥1.00	= $\quad$A$0.18
14 July 20X0$\quad$$\quad$¥1.00	= $\quad$A$0.19
-What was the foreign currency exchange difference recognised for the reporting period ending 30 June 20X0 by Led Ltd on the transaction?
A)$30,000 FC exchange difference revenue
B)$30,000 FC exchange difference expense
C)$60,000 FC exchange difference revenue
D)$60,000 FC exchange difference expense

Quizplus · Accepted Answer

Led Pty Ltd sold a machine for ¥3,000,000 on 1 June 20X0. Since the risks and benefits of the machine transferred to the purchaser on delivery, the transaction date for recognizing the foreign currency exchange difference is 1 June 20X0.

The functional currency of Led Pty Ltd is A$, and the exchange rate on 1 June 20X0 was ¥1.00 = A$0.20. Therefore, the transaction value in A$ is calculated as follows:

Transaction value in A$ = ¥3,000,000 × A$0.20 = A$600,000

On 30 June 20X0, the exchange rate was ¥1.00 = A$0.18. Therefore, the transaction value in A$ as at 30 June 20X0 is calculated as follows:

Transaction value in A$ at 30 June 20X0 = ¥3,000,000 × A$0.18 = A$540,000

The foreign currency exchange difference is the difference between the transaction value in the functional currency at the transaction date and the transaction value in the functional currency at the reporting date.

Foreign currency exchange difference = A$600,000 - A$540,000 = A$60,000

Since the exchange rate decreased, the foreign currency exchange difference is a loss for Led Pty Ltd, which is recognized as an expense. Therefore, the correct answer is (D) $60,000 FC exchange difference expense.

On 1 June 20X0, Led Pty Ltd Sold a Machine \quad

On 1 June 20X0, Led Pty Ltd Sold a Machine $\quad$