School of Accountancy

Department of Accounting

QUESTION BANK:
SUGGESTED SOLUTIONS
CACN030
IAS21: THE EFFECTS OF CHANGES IN
FOREIGN EXCHANGE RATES
STUDENT NAME:
STUDENT NUMBER:
QUESTIONS DESCRIPTION PAGE

Question 1 CACN021 – EXAM (2016) 3

Question 2 GAAP: GRADED QUESTIONS 6

Question 3 Unknown 7

Question 4 CACN022 TEST 2 (2021) 9

Question 5 CACN022 EXAM (2021) – QUESTION 3 13

Question 6 CACN022 SUPP EXAM (2021) – 14

QUESTION 3 (EXTRACT)

Question 7 CACN022 TEST 1 (2020) 15

Question 8 CACN022 TEST 2 (2020) 16

Question 9 CACN022 Exam (2020) 17

Question 10 CACN030 19
QUESTION 1
SOURCE: QUESTION 1 [CACN021 – EXAM (2016)]
TOTAL MARKS: 34 MARKS

Aowa Limited
Notes to the financial statements for the year ended 31 December 2015

Land Buildings Motor Machinery Office

vehicles equipment
NCA 3 199 402 720 000 - 750 000
GCA 2 259 575 W1 3 389 362 W2 1 800 000 ^ - 1 250 000 W10.
1

Accumulated depreciation - (189 960) W3 1 080 000 W5 - (500 000) W10.

2

Additions - - 650 000 W6 2 788 500 W8

Revaluation surplus - - - - 80 000 W11

Disposal - - - (330 000) W12

Cost - - - (550 000) W13.

1

Accumulated depreciation - - - 220 000 W13.

2

Depreciation (151 968) W4 (308 125) W7 (278 850) W9 (100 000) W14
Impairment - (50 000) ^ -

NCA 2 259 575 3 047 434 1 011 875 2 509 650 500 000
GCA 2 259 575 ^ 3 389 362 ^ 2 450 000 ^ 2 788 500 ^ 740 000 ^
Accumulated depreciation - (341 928) ^ 1 438 125 ^ (278 850) ^ (240 000) ^

WORKINGS
W1 (5 298 938^ + 350 000^) x 40%^
W2 (5 298 938^ + 350 000^) x 60%^
W3 (3 389 362^ – 350 000^) ÷ 20^ x 15/12^
W4 (3 389 362^ – 350 000^) ÷ 20^
W5 1 800 000^ *15%^ x 4^
W6 741 000^ x 100/114^

W7 Depreciation on old vehicles = 1 800 000^ x 5/6^*15%^

= 225 000
Depreciation on impaired vehicle = [(720 000^ x 1/6^) – 50 000^] ÷ (6.6666 – 4)^
= 26 250
Depreciation on new vehicle = 650 000^ *15%^ x 7/12^
= 56 875
 Total depreciation = 225 000^ + 26 250^ + 56 975^

W8 Cost of new machine

Cost (250 000 x 9.75) 2 437 500

Shipping costs 44 000 ^
Transport costs 150 000 ^
Installation costs 7 000 ^
Dismantling costs 150 000 ^
Total costs 2 788 500

W9 2 788 500^ x 20%^ x 6/12^

W10.1 X/10*6^ = 750 000^
X = 750 000^/0.6^
W10.2 1 250 000^/10*4^
W11 500 000^ – (750 000^- 330 000)^
W12 360 000^ – 30 000^
W13.1 X/10*6^ = 330 000^
X = 330 000/0.6^
W13.2 550 000^/10*4 ^
W14 500 000^ ÷ 6^
35.5 limited to [35]
QUESTION 2
SOURCE: GAAP GRADED QUESTIONS
TOTAL MARKS: 15 MARKS

Debit Credit
25 July 20X5
Inventory (A) 760 000
Foreign creditor (L) 760 000
USD 100 000 x 7.60 (spot rate on transaction
date)
Importation of advanced monitoring devices

31 December 20X5
Foreign creditor (L) 50 000
Foreign exchange gain (P/L) 50 000
USD 100 000 x 7.10 (spot rate at year-end)
Translation of foreign creditor at year-end

Cost of sales (E) 608 000

Inventory (A) 608 000
760 000 x 80%
Cost of goods sold

Trade receivables/ Bank (A) 729 600

Sales (P/L) 729 600
760 000 x 120% mark-up x 80% sold at year-
end
Revenue from sale of goods

2 February 20X6
Foreign creditor (L) 710 000
Bank (A) 690 000
USD 100 000 x 6.90 (spot rate on payment
date)
Foreign exchange gain (P/L) 20 000
710 000 balance recorded – 690 000
Translation and payment of foreign creditor

Note:

When goods are shipped on a DAT basis (delivery at terminal), the risks and rewards of
ownership transfer on the date that the goods arrive safely in the local harbour
(destination) and are unloaded: ⚫ in this case, it means that the transaction date is 25
July 20X5
Had the transaction been FOB or CIF, the risks and rewards of ownership would have
transferred on the date that the goods were shipped – in which case the transaction date
would have been 15 July 20X5.
QUESTION 3
COMPANY: BABY DOLL
TOTAL MARKS: 10 MARKS

Debit Credit 
Financial year ending 30 June 2010 

30 April 2010 
Foreign debtor (SoFP) 593 300 
Revenue (SoCI) 593 300 
Foreign exchange transaction at initial recognition 
[85 000 x 6.98]

30 June 2010 
Foreign debtor (SoFP) 10 200 
Profit on foreign exchange transaction (SoCI) 10 200 
Restatement of foreign debtor at reporting date 
[(85 000 x 7.10) - (85 000 x 6.98)]

Financial year ending 30 June 2011 

31 July 2010 
Loss on foreign exchange transaction (SoCI) 6 800 
Foreign debtor (SoFP) 6 800 
Restatement of foreign debtor on payment date 
[(85 000 x 7.02) - (85 000 x 7.10)]

Bank (SoFP) 596 700 
Foreign debtor (SoFP) 596 700 
Payment received 
[85 000 x 7.02]

QUESTION 4
SOURCE: CACN021 TEST 2 (2021)
TOTAL MARKS: 40 MARKS

PART A

DATE DEBIT CREDIT

1 Nov 2019 Inventory (SFP) (1) 800 000
Foreign creditor (SFP) (1) 800 000
(400 000 (0.5) / 0.5 (0.5))
Recognise inventory and foreign creditor on transaction date

10 Sep 2020 Trade receivables (SFP) (1) 900 000

Revenue (SPL) (1) 900 000
(800 000 (0.5P) x 75 % (0.5)) + 50 % (0.5))
Sale of inventory during the year

Cost of sales (SPL) (1) 600 000

Inventory (SFP) (1) 600 000
(800 000 (0.5P) x 75 % (0.5))
Update inventory after sales transaction as per perpetual system

30 Sep 2020 Foreign exchange loss (SPL) (1) 200 000

Foreign creditor (SFP) (1) 200 000
(400 000 / 0.4 (0.5)) – (800 000 (0.5P))
Translate foreign creditor on year end date

10 Oct 2020 Bank (SFP) 900 000

Trade receivables (SFP) 900 000
Receipts from debtor outstanding from 2021

15 Sep 2020 Trade receivables (SFP) (1) 300 000

Revenue (SPL) (1) 300 000
((800 000 0.5P) x 25 % (0.5)) + 50 % (0.5))
Sale of inventory during the year

Cost of sales (SPL) (1) 200 000

Inventory (SFP) (1) 200 000
(800 000 (0.5P) x 25 % (0.5))
Update inventory after sales transaction as per perpetual system

30 Sep 2021 Foreign creditor (SFP) (1) 500 000

Foreign exchange gain (SPL) (1) 500 000
(400 000 / 0.8 (0.5)) – (1 000 000 (0.5P))
Translate foreign creditor on settlement date
 Foreign creditor (SFP) (1) 500 000
Bank (SFP) (1) 500 000
(400 000 / 0.8 (0.5) )
Settlement of the foreign creditor
Dates (0.5)
Narrations (0.5)

Available marks: [25.5]

Maximum marks: [25]

PART B

Lustrous Stones Limited (0.5)

Extract of Statement of Financial Position as at 31 September 2021
2021 2020

Non-current assets

Current assets

Trade and other receivables 300 000 (1P) 900 000 (1P)
or 1 000 000
(typing error on
paper)

Inventory 0 (1P) 200 000 (1P)

(2020: (800 000 x 25 %) or 800 000
– 600 000

Bank 250 000 (0.5) 330 000 (0.5)

Current liabilities

Trade and other payables 0 (1P) 1 000 000 (1P)

(2020: 400 000 / 0.4 ) or (800 +
200 000)
PART C

Lustrous Stones Limited (0.5)

Extract of Statement of Profit or Loss for the year ended 30 September 2021

2021 2020

Revenue 300 000 (1P) 900 000 (1P)

Cost of sales (200 000) (1P) (600 000) (1P)

Gross profit 100 000 300 000

Foreign exchange gain 500 000 (1P)

Foreign exchange loss (200 000) (1P)

Profit for the year 600 000 100 000

QUESTION 4
SOURCE: CACN022 EXAM (2021) – QUESTION 3
TOTAL MARKS: 20 MARKS

DEBIT CREDIT
1 Oct 2020 Bank (SFP) (1) 453 000
Loan (SFP) (1) 453 000
(30 000 (0.5) x 15.100 (0.5))
Borrow money from USA business man

30 Sep Foreign debtor (SFP) (1) 754 675

2021
Rental income (SPL) (1) 754 675
(50 000 (0.5) x 15.0935 (0.5))
Rental income earned during the year translated at average rate

Finance costs (SPL) (1) 45 281

Loan (SFP) (1) 45 281
(30 000 x 10% (0.5) x 15.0935 (0.5))
Interest incurred on the loan translated at average rate.

Loan (SFP) (1) 181 614

Bank (SFP) (1) 181 614
(12 065 (0.5) x 15.053 (0.5))
Payment made towards loan balance.

Loan (SFP) (1) 1 532

Foreign exchange gain (SPL) (1) 1 532
(30 000 (0.5) + 3 000 (0.5) –12 065 (0.5) = 20 935 x 15.053 (0.5) =
315 135
453 000 (0.5) + 45 281 (0.5) – 181 614 (0.5) = 316 667
315 135 – 316 667 = 1 532 (0.5))
Foreign exchange difference on loan.

Foreign exchange loss (SPL) (1) 2 025

Foreign debtor (SFP) (1) 2 025
(50 000 x (15.0935 (0.5) – 15.053 (0.5))
Translate foreign debtor to spot rate at year end.

Dates (0.5)
Narrations (0.5)
QUESTION 6
SOURCE: CACN022 SUPP EXAM (2021) – QUESTION 3 (EXTRACT)
TOTAL MARKS: 12

PART B
DEBIT CREDIT

18 Mar 2020 Foreign debtor (SFP) (1) 197 500

Revenue (SPL) (1) 197 500
(10 000 x 19.75 (0.5))
Recognition of sales transaction to foreign debtor

31 Mar 2020 Loss on foreign exchange (1) 5 000

(SPL)
Foreign debtor (1) 5 000
(10 000 x (19.75 (0.5) – 19.25 (0.5))
Adjust foreign debtor to spot rate at year end

30 Sep 2020 Loss on foreign exchange (1) 3 500

(SPL)
Foreign debtor (SFP) (1) 3 500
(10 000 x (19.25 (0.5) – 18.90 (0.5))
Adjust foreign debtor to spot rate at settlement date

Bank (SFP) (1) 189 000

Foreign debtor (SFP) (1) 189 000
(10 000 x 18.90 (0.5))
Receipt from foreign debtor

Dates (0.5)
Narrations (0.5)

Available marks: [12]

Maximum marks: [12]
QUESTION 7
SOURCE: CACN022 TEST 1 (2020)
TOTAL MARKS: 15

DEBIT CREDIT
25 Jun 2019 No journal.
16 Jul 2019 Equipment (SFP) (1) 2 035 000
Foreign creditor (SFP) (1) 2 035 000
[(44 000 (0.5) x 5 (0.5)) x 9.25 (0.5)]
Import of machine

31 Aug 2019 Foreign exchange loss (SPL) (1) 143 000

Foreign creditor (SFP) (1) 143 000
[(220 000 (0.5) x 9.9 (0.5)) – 2 035 000 (0.5)]
Translation of foreign creditor on payment date

Foreign creditor (SFP) (1) 2 178 000

Bank (SFP) (1) 2 178 000
[2 013 000 (0.5) + 143 000 (0.5)]
Payment of foreign creditor.

31 May 2020 Depreciation (SPL) (1) 151 125

Accumulated dep (SFP) (1) 151 125
[(2 035 000 (0.5) – 20 000 (0.5)) / 10 (0.5) x 9/12 (0.5)]
Depreciation of machines from date of first use

D (1)

Available marks: [15]

Maximum marks: [15]
QUESTION 8
SOURCE: CACN022 TEST 1 (2020)
TOTAL MARKS: 20

a)

DEBIT CREDIT
01 Mar 2020 No journal.
01 May 2020 Inventory/Purchases (SFP) (1) 1 262 400
Foreign creditor (SFP) (1) 1 262 400
(80 000 (0.5) x 15.78 (0.5) )
Recognition of purchase transaction and creditor

31 Jul 2020 Foreign creditor (SFP) (1) 24 800

Foreign exchange gain (SPL) (1) 24 800
(80 000 (0.5) x (15.47 (0.5) – 15.78 (0.5) ))
Creditor adjusted to spot rate at year-end

31 Aug 2020 Foreign exchange loss (SPL) (1) 41 600

Foreign creditor (SFP) (1) 41 600
(80 000 (0.5) x (15.99 (0.5) – 15.47 (0.5) ))
Re-measure creditor to spot rate at settlement date

Foreign creditor (SFP) (1) 1 279 200

Bank (SFP) (1) 1 279 200
(1 262 400 (0.5) - 24 800 (0.5) + 41 600 (0.5))
Settlement of foreign creditor

D (1)
N (1)

Available marks: [15.5]

Maximum marks: [15]

b)
31 Jul 2021 Foreign exchange loss (SPL) (1) 122 400
Foreign creditor (SFP) (1) 122 400
 (80 000 (0.5) x (15.47 (0.5) – 17.00 (0.5) ))
Creditor adjusted to spot rate at year-end

The journal would be required to adjust the creditor to spot rate at year end (1) for a
second time since the account has not yet been settled. (1)
QUESTION 9
SOURCE: CACN022 EXAM (2020)
TOTAL MARKS: 20

DEBIT CREDIT
NO MARKS AWARDED FOR JOURNALS IN GREY, NOT IN FINANCIAL YEAR
30 Nov 2019 Equipment (SFP) 3 110 000
Foreign creditor (SFP) 3 110 000
(200 000 x 15.55)
Recognition of purchase transaction and creditor

31 Dec 2019 Foreign exchange loss (SPL) 30 000

Foreign creditor (SFP) 30 000
(200 000 x (15.55 – 15.70))
Creditor adjusted to spot rate at year-end
31 Jan 2020 Foreign exchange loss (SPL) (1) 19 500
Foreign creditor (SFP) (1) 19 500
(150 000 x (15.83 (0.5) – 15.70 (0.5) ))
Re-measure creditor to spot rate at payment date

Foreign creditor (SFP) (1) 2 374 500 (0.5)

Bank (SFP) (1) 2 374 500
(150 000 x 15.83 )
First payment towards foreign creditor
30 Apr 2020 Foreign creditor (SPL) (1) 2 500
Foreign exchange gain (SFP) (1) 2 500
(50 000 x (15.70 (0.5) – 15.65 (0.5) ))
Re-measure creditor to spot rate at settlement date

Foreign creditor (SFP) (1) 782 500 (0.5)

Bank (SFP) (1) 782 500
(50 000 x 15.65)
Settlement of foreign creditor

31 Dec 2020 Depreciation (SPL) (1) 561 000

Accumulated depreciation (SFP) (1) 561 000
((200 000 x 15.55 (0.5) = 3 110 000 – 50 000 (0.5) ) / 5 (0.5) x 11/12 (0.5))
Depreciation on equipment

D&N (0.5)
Available marks: [15.5]
Maximum marks: [14]
a. Memorandum
To: Operating director
From: CACN022 student (1)

According to IAS 21 monetary items is initially recognised at the spot rate on

transaction date. (1)

In this case the transaction date was the date when the equipment was shipped
free on board, 30 November 2019. (1)
The foreign creditor was recorded at the spot rate on that date as
$ 200 000 x 15.55 = R 3 110 000. (1)

According to IAS 21 monetary items is settled at the spot rate on settlement

date. (1)
Therefore the balance owed to the foreign creditor was translated on the
respective settlement dates using the applicable spot rates as follows:
$ 150 000 x 15.83 = R 2 374 500
$ 50 000 x 15.65 = R 782 500
This means that the amount paid to the foreign creditor was R 3 157 000. (1)
 QUESTION 10
SOURCE: CACN030
TOTAL MARKS: 20

Interest translate at average rate

Instalment translate at the rate at the date of the instalment payment
Loan balance translate at the closing rate
Foreign currency £
Opening Closing
Date balance Interest Instalment balance
30/06/17 100 000.00 8 000.00 (11 682.95) 96 317.05
(amort 1)
30/06/18 96 317.05 7 705.36 (11 682.95) 92 339.46
(Amort 2)
30/06/19 92 339.46 7 387.16 (11 682.95) 88 043.67
(Amort 3)

PV = 100 000
N = 15
I = 8%
FV= 0
COMP PMT = 11 682.95
South African Rand R
Foreign
Opening exchange Closing
Date balance Interest Instalment gain/loss balance
30/06/17 1 005 000.00 80 080.00 (116 362.18) (9 400.00)** 959 317.82*
(100 000 X (8 000 X (11 682.95 X (96 317.05 X
10.05) 10.01) 9.96) 9.96)
30/06/18 959 317.82 80 829.27 (128 746.11) 106 179.92 1 017 580.89
(7 705.36 X (92 339.46 X
10.49) 11.02)
30/06/19 1 017 580.89 79 929.04 (123 956.10) (39 410.48) 934 143.35

* 96 317 .05 * 9.96 (closing rate at year end) = 959 317.82

** (1 005 000 + 80 080 – 116 362.18) – 959 317.82

Journals for 2017 financial year Debit Credit 


1 July 2016 
Manufacturing plant (SFP) 1 005 000.00 
Foreign currency loan (SFP) 1 005 000.00 
(Recording foreign currency transaction) 
(100 000 X 10.05) 
30 June 2017 
Interest paid (P/L) 80 080.00 
Foreign currency loan (SFP) 80 080.00 
Recording of interest of foreign loan 
 
Foreign currency loan (SFP) 116 362.18 
Bank (SFP) (11 682.95 X 9.96) 116 362.18 
Payment of instalment 

Foreign currency loan (SFP) 9 400.00 
Foreign exchange gain (P/L) 9 400.00 
Translating loan balance to closing rate 


Journals for 2018 financial year 

30 June 2018 
Interest paid (P/L) 80 829.27 
Foreign exchange loss (P/L) 106 179.92 
Bank (SFP) 128 746.11 
Foreign currency loan (SFP) 58 263.08 
(Recording transactions relating to movement in foreign 
currency loan)


Journals for 2019 financial year 

30 June 2019 
Interest paid (P/L) 79 929.04 
Foreign currency loan (SFP) 83 437.54 
Foreign exchange gain (PL) 39 410.48 
Bank (SFP) 123 956.10 
(Recording transactions relating to movement in foreign 
currency loan)