Ruby Berhad, a Malaysian company signed a contract on 1 December 2019 to buy machinery from Ecuador payable in 60 days from the purchase date. Ruby Berhad’s financial year ended on 31 December. The machinery’s price was estimated at USD 1,000,000. The spot exchange rate between Ringgit Malaysia (RM) and the USD on that date was, 1 USD = RM4.3. The exchange rate at the end of the financial year was 1 USD = RM4.28 and the exchange rate at the settlement date, 31 January 2020 was 1 USD = RM4.25.
- Prepare the journal entries to record the purchase of the machinery on 1 December 2019.
- Prepare the journal entries to record the unrealized gain on 31 December 2019 using:
i. Direct deduction from account payable
ii. Provision account. - Prepare the journal entry to record the settlement on 31 January 2020.
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