Question
Part A. Explain functional currency and suggest one indicator that an entitymay consider to determine its functional currency. (4 marks) Part B. On 1 December
Part A.
Explain "functional currency" and suggest one indicator that an entitymay consider to determine its functional currency.
(4 marks)
Part B.
On 1 December 2019, Company EX, with a functional currency and presentation currency in HKD, sold and deliver an inventory to a customer in Paris at EUR10,000. EX has received the money only in 2020.
Exchange rate of EUR/HKD was 8.79 and 8.96 respectively on 1 December 2019 and 31 December 2019.
Required:Prepare the journal entries for EX in HKD for the year ended 31 December 2019.
(4 marks)
Part C.
Company PriceBest established a wholly-owned Company Sugar on 1 January 2019. Sugar has a functional currency in USD but PriceBest requires Sugar to use SGD as its presentation currency.
Company Sugar Statement of Financial Position As at 31 December 2019
Property
Cash
Inventory
Accounts receivable
Share capital Retained earnings Accounts payable
1 January 2019
31 December 2019
Average for the year of 2019
USD 20,000
130,000 200,000 100,000 450,000
150,000 270,000 30,000 450,000
USD/SGD spot rates 1.24
1.36 1.30
Required:Translate Sugar's statement of financial position as at 31 December 2019from USD to SGD using the closing rate method.
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