Sammy Ltd Hired a US-Based Consultant to Assist with a Major

question 28

Multiple Choice

Sammy Ltd hired a US-based consultant to assist with a major client’s request to improve its internal control system. The consultant’s invoice for US$300,000 was received by Sammy Ltd on 23 June 2000, and paid on 23 July 2000.
Some spot foreign exchanges rates were:
$\begin{array} { l l l l } \text { 23 June 20X0 } & \text { US\$ } 1.00 & = & \text { A\$ } 1.6667 \\\text { 30 June 20X0 } & \text { US\$ } 1.00 & = & \text { A\$ } 1.5385 \\\text { 23 July 20X0 } & \text { US\$ } 1.00 & = & A \$ 1.6128\end{array}$
-Which is the journal entry to record the foreign exchange difference at 30 June 20X0?

• A)\(\begin{array}{lrc}
• \text { Accounts } & \text { Debit } \$ & \text { Credit } \$ \\
• \text { Accounts payable } & 38460 & \\
• \text { Consultant's fees } & & 38460
• \end{array}\)
• B)\(\begin{array}{lrc}
• \text { Accounts payable } &38460 \\
• \text { Revenue - FC exchange difference } &&& 38460 \\
• \end{array}\)
• C)\(\begin{array}{lrc}
• \text { Accounts payable } &&&14999\\
• \text { Consultant's fees } & 14999\\
• \end{array}\)
• D)\(\begin{array}{lrc}
• \text { Accounts payable } &&&14999\\
• \text { Expense - FC exchange difference} & 14999\\
• \end{array}\)

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Definitions:

Perpetual Inventory System

An accounting method that records inventory transactions in real-time, immediately affecting the inventory account whenever an item is received or sold.

Discount Period

The time frame between the onset of a payment period and the due date when a discount for early payment is available.

Perpetual Inventory System

An inventory management system where updates to inventory records are made in real-time with each sale or purchase, providing a continuous record of inventory levels.

Discount Period

The timeframe during which a discount is offered for prompt payment on sales.