Analyze factors effecting change of valuation of currency

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Reference no: EM132601632

M/s Ericson Company is a trading company and engages in imports and exports business in Pakistan. On 15th May, 2020 Company purchased "machinery A" from US amounting US$ 1 Million. The currency rate was $1 against Rs. 165. The company needs to repay the amount after 2 months. At the time of payment the US$ was standing at Rs. 170. As on June 30, 2020 the Dollar rate was Rs. 167.

On 15th June, 2020 Company sold "machinery B" to UK amounting UK£ 1 Million. The currency rate was UK£1 against Rs. 200. The company needs to get the amount after 1 month. At the time of receipt the UK£ was standing at Rs. 215. As on June 30, 2020 the UK£ rate was Rs. 205. The financial year ended on June 30, 2020.

You are required to make:

Question a. Make all relevant Journal entries for Machinery A & Machinery B.

Question b. Amount of Gain or Loss due to change of Exchange rate for the company

Question c. Analyze the factors effecting the change of valuation of currency.

Reference no: EM132601632

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