Additional information: (1) The fixed assets are depreciated using the straight-line method at the rate of 20%. (2) During the year, patent costing 60,000 was purchased. The estimated useful life of the patent is 4 years. A full years amortization was recorded in the year of purchase. (3) Bear Limited uses the FIFO method for its inventory. All the sales and purchases of inventory were made evenly throughout the year. (4) The operating expenses were also incurred evenly throughout the year. 3 (5) On 31 December 2020, 30,000 dividend was declared and paid.

Required: (a) If Bear Limiteds functional currency is the pounds (), translate the financial statements of Bear Limited into dollars ($) for the year ended 31 December 2020. (19 marks) (b) Prepare a schedule to show the proof of translation gain or loss. (4 marks)

Question 2 (23 marks) On 31 December 2019, Teddy Limited acquired the entire shares of Bear Limited, a foreign company whose local currency is pounds . Bear Limited's financial statements are as follows: Bear Limited Statement of Financial Position as at 31 December 2020 2019 Fixed assets, net 280,000 350.000 Patent 45,000 Inventory 90,000 70,000 Accounts receivable 180,000 120,000 Cash 85,000 60,000 Accounts payable (60,000) (95,000) Net assets 620.000 505.000 Share capital Retained earnings Equity 420,000 200,000 620.000 420,000 85.000 505.000 Bear Limited Income Statement and Partial Statement of Changes in Equity for the year ended 31 December 2020 Sales 750,000 Cost of sales (360,000) Gross profit 390,000 Amortization and depreciation expense (85,000) Other operating expenses (134,000) Profit before tax 171,000 Tax expense (26,000) Net profit after tax 145,000 Dividends paid (30,000) Retained earnings, 1 January 2020 85.000 Retained earnings, 31 December 2020 200.000 (6) Relevant exchange rates are as follows: On 31 December 2019 Average rate for closing inventory purchased in 2020 At the date of patent purchased Average rate for 2020 On 31 December 2020 1 = $1.35 $1.32 $1.33 $1.34 $1.3 Question 2 (23 marks) On 31 December 2019, Teddy Limited acquired the entire shares of Bear Limited, a foreign company whose local currency is pounds . Bear Limited's financial statements are as follows: Bear Limited Statement of Financial Position as at 31 December 2020 2019 Fixed assets, net 280,000 350.000 Patent 45,000 Inventory 90,000 70,000 Accounts receivable 180,000 120,000 Cash 85,000 60,000 Accounts payable (60,000) (95,000) Net assets 620.000 505.000 Share capital Retained earnings Equity 420,000 200,000 620.000 420,000 85.000 505.000 Bear Limited Income Statement and Partial Statement of Changes in Equity for the year ended 31 December 2020 Sales 750,000 Cost of sales (360,000) Gross profit 390,000 Amortization and depreciation expense (85,000) Other operating expenses (134,000) Profit before tax 171,000 Tax expense (26,000) Net profit after tax 145,000 Dividends paid (30,000) Retained earnings, 1 January 2020 85.000 Retained earnings, 31 December 2020 200.000 (6) Relevant exchange rates are as follows: On 31 December 2019 Average rate for closing inventory purchased in 2020 At the date of patent purchased Average rate for 2020 On 31 December 2020 1 = $1.35 $1.32 $1.33 $1.34 $1.3