(a)Provide brief answers to the following questions based on IAS 21:

(i)What is the difference between conversion and translation?

(ii)Define 'monetary' items

(iii)How should foreign currency transactions be recognized initially in an individual enterprise's accounts?

(iv)What factors must management take into account when determining the functional currency of a foreign operation?

(v)How should goodwill and fair value adjustments be treated on consolidation of foreign operations?

(vi)How can an entity's functional currency be changed?

6 marks

(b)Silver StoneCo.whose year-end is 31 December, buys some goods from Rinka SA of France on 30 September. The invoice value is 40,000 and is due for settlement in equal instalments on 30 November and 31 January. The exchange rate moved as follows.

to $1

30 September

1.60

30 November

1.80

31 December

1.90

31 January

1.85

Required

State the accounting entries in the books of Silver Stone Co.