Question
On 1 July 2019, an Australian company Frankston Ltd acquired all the issued shares of in Boston Ltd, a company incorporated in the United States
On 1 July 2019, an Australian company Frankston Ltd acquired all the issued shares of in Boston Ltd, a company incorporated in the United States (US). At this date Boston Ltd had the following account balances:
|
| US$ |
| Bank loan | 4 000 |
| Plant and equipment | 4 200 |
| Cash and debtors | 400 |
| Inventory | 2 000 |
| Retained earnings | 600 |
Other account balances for Boston Ltd at 30th June 2020 are as follows:
|
| US$ Dr | US$ Cr |
| Share capital |
| 2 000 |
| Retained earnings |
| 1 200 |
| Bank loan |
| 4 000 |
| Accounts payable |
| 1 600 |
| Sales |
| 10 000 |
| Plant and equipment | 3 800 |
|
| Cash and debtors | 3 200 |
|
| Inventory | 1 800 |
|
| Purchases | 8 000 |
|
| Administration expense | 300 |
|
| Depreciation expense | 400 |
|
| Income tax expense | 500 |
|
Exchange rates for the year ending 30 June 2020 are as follows:
| 1 July 2019 | US$1 = A$1.50 |
| 30 June 2020 | US$1 = A$1.70 |
| Average for year | US$1 = A$1.60 |
| Ending inventory acquired (before year end) | US$1 = A$1.65 |
Required:
- Prepare the Statement of profit or loss and other comprehensive income and the statement of financial position of the foreign operation at 30 June 2020, assuming that the US dollar is the functional currency of Boston Ltd and the Australian dollar is the presentation currency of the group.
- Calculate the foreign currency translation reserve.
Boston Ltd
Statement of profit or loss and other comprehensive income for the year ending 30 June 2020
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| US $ | Rate | A$ |
| Sales |
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| Less: Cost of sales |
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| Inventory 1 July 2019 |
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| Purchases |
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| Inventory 30 June 2020 |
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| Administration expenses |
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| Depreciation expense |
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| Profit before tax |
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| Income tax expense |
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| Profit after tax |
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| Other comprehensive income |
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| Increase in foreign currency translation reserve |
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| Total comprehensive income |
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Statement of financial position as at 30 June 2020
| Assets | US $ | Rate | A$ |
| Cash and debtors |
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| Inventory |
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| Plant and equipment |
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| Liabilities |
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| Accounts payable |
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| Bank loan |
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| Net Assets |
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| Equity |
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| Share capital |
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| Retained profits |
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| Foreign currency translation reserve |
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Foreign currency translation reserve:
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EDI Security Control And Audit
Authors: Albert J. Marcella Jr, Sally Chan, John Merriam
1st Edition
0890066108, 978-0890066102
