On 1 January 2018, Kookaburra Ltd, an Australian company, acquired all of the issued shares of Polar Ltd, a company incorporated in Canada as it looks to expand its operations into new overseas markets The net assets of Polar Ltd in Canadian Dollar (CAD) on that date consisted of $ CAD Share Capital 600,000 Retained Profits 250,000 Total Equity 850,000 The relevant exchange rates for the period are as follows 1 $CAD $AUD 2018 1 January 2018 0 60 31 December 2018 0 70 Average final quarter 2018 0 65 Average for year 2018 0 64 2019 1 January 2019 0 71 1 April 2019 0 74 31 December 2019 0 80 Average April December 2019 0 76 Average final quarter 2019 0 77 Average for year 2019 0 75 Additional information relating to Polar Ltd On 1 April 2019, Polar Ltd acquired new equipment for CAD $100,000 This equipment is depreciated over a five (5) year period No other additions to Property, Plant and Equipment were made since 1 January 2018, the acquisition date The interim dividend was paid on 1 April 2019 whilst the final dividend was declared on 31 December 2019 Sales, purchases and expenses for the period ending 31 December 2019 occurred evenly throughout the year However, the inventory on hand at 31 December 2019 represented purchases made in the final quarter 2019 The opening inventory, as at 1 January 2019 represented purchases made in the final quarter of 2018 The loan of CAD 100, 000 from Kookaburra Ltd was granted to the subsidiary, Polar Ltd on 1 January 2019 for a three (3) year period The interest rate is charged at 15 per annum Interest is required to be paid annually on 31 December each year Polar adopted the revaluation model on 31 December 2018 for the category of Land This resulted in a revaluation gain of CAD $40,000 recorded as at 31 December 2018 and a further CAD $30,000 gain as at 31 December 2019 This represents the Asset Revaluation Surplus balance recorded as at 31 December 2019 in the books of Polar Ltd Review of last years working papers for the period ending 31 December 2018 indicated the closing retained earnings was CAD $320,000 which was translated into AUD $208,000 based on the various rates required by the accounting standard Required The trial balance of Polar Ltd for the period ending 31 December 2019 is presented on pages 4 and 5 of this question The functional currency of Polar Ltd is considered to be Canadian Dollar (CAD) Prepare the translation for the 31 December 2019 financial statements of Polar Ltd (in CAD) into Australian Dollars (AUD) Round all numbers to the nearest whole number (10 marks)

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Aug 20, 2024

On 1 January 2018, Kookaburra Ltd, an Australian company, acquired all of the issued shares of Polar Ltd, a company incorporated in Canada as it

On 1 January 2018, Kookaburra Ltd, an Australian company, acquired all of the issued shares of Polar Ltd, a company incorporated in Canada as it looks to expand its operations into new overseas markets. The net assets of Polar Ltd in Canadian Dollar (CAD) on that date consisted of:

		$ CAD
Share Capital		600,000
Retained Profits		250,000
Total Equity		850,000

The relevant exchange rates for the period are as follows:

1 $CAD = $AUD

2018
1 January 2018	0.60
31 December 2018	0.70
Average final quarter 2018	0.65
Average for year 2018	0.64

2019
1 January 2019	0.71
1 April 2019	0.74
31 December 2019	0.80
Average April December 2019	0.76
Average final quarter 2019	0.77
Average for year 2019	0.75

Additional information relating to Polar Ltd:

On 1 April 2019, Polar Ltd acquired new equipment for CAD $100,000. This equipment is depreciated over a five (5) year period. No other additions to Property, Plant and Equipment were made since 1 January 2018, the acquisition date.

The interim dividend was paid on 1 April 2019 whilst the final dividend was declared on 31 December 2019.

Sales, purchases and expenses for the period ending 31 December 2019 occurred evenly throughout the year. However, the inventory on hand at 31 December 2019 represented purchases made in the final quarter 2019. The opening inventory, as at 1 January 2019 represented purchases made in the final quarter of 2018.

The loan of CAD 100, 000 from Kookaburra Ltd was granted to the subsidiary, Polar Ltd on 1 January 2019 for a three (3) year period. The interest rate is charged at 15% per annum. Interest is required to be paid annually on 31 December each year.

Polar adopted the revaluation model on 31 December 2018 for the category of Land. This resulted in a revaluation gain of CAD $40,000 recorded as at 31 December 2018 and a further CAD $30,000 gain as at 31 December 2019. This represents the Asset Revaluation Surplus balance recorded as at 31 December 2019 in the books of Polar Ltd.

Review of last years working papers for the period ending 31 December 2018 indicated the closing retained earnings was CAD $320,000 which was translated into AUD $208,000 based on the various rates required by the accounting standard.

Required:

The trial balance of Polar Ltd for the period ending 31 December 2019 is presented on pages 4 and 5 of this question. The functional currency of Polar Ltd is considered to be Canadian Dollar (CAD). Prepare the translation for the 31 December 2019 financial statements of Polar Ltd (in CAD) into Australian Dollars (AUD). Round all numbers to the nearest whole number. (10 marks)