On 1 July 2003 Kanga Consultants Ltd completes a contract to provide advice on the installation of a networked computer system to a company in the US.The client pays the fee of US$500,000 into Kanga Consultants' US bank account on that date.The bank pays interest of 8 per cent annually on 30 June.The exchange rate information is: What journal entries are required in Kanga Consultants Ltd's books for 1 July 2003 and 30 June 2004 in accordance with AASB 1012 (rounded to the nearest whole $A)?

Question

On 1 July 2003 Kanga Consultants Ltd completes a contract to provide advice on the installation of a networked computer system to a company in the US.The client pays the fee of US$500,000 into Kanga Consultants' US bank account on that date.The bank pays interest of 8 per cent annually on 30 June.The exchange rate information is:  What journal entries are required in Kanga Consultants Ltd's books for 1 July 2003 and 30 June 2004 in accordance with AASB 1012 (rounded to the nearest whole $A)?

Quizplus · Accepted Answer

1 July 2003:
- Debit Bank account (USD): $500,000
- Credit Revenue: $500,000

30 June 2004:
- Debit Revenue: $40,000 (8% of $500,000)
- Credit Interest income: $40,000
- Debit Exchange gain: $37,010 (500,000 USD x 0.6202 - 500,000 USD x 0.6474)
- Credit Bank account (AUD): $500,000

On 1 July 2003 Kanga Consultants Ltd Completes a Contract