Question 1 20 marks

On 1 July 2020, Palm Beach Ltd, an Australian company, acquired shares in Happy Valley Ltd, a company based in Hong Kong. At this date, the equity of Happy Valley Ltd was as follows.

	HK$
Share Capital	200,000
General Reserve	100,000
Retained earnings	225,000

All transactions occurred evenly throughout these years. The internal financial statements of the two companies at 30 June 2021 were as follows.

Statements of profit and loss and other comprehensive income
	Palm Beach Limited	Happy Valley Limited
	A$	HK$
Sales	700,000	620,000
Cost of sales	300,000	400,000
	400,000	220,000
Expenses	210,200	100,000
	189,800	120,000
Dividend revenue	21,250	-
Profit before income tax	211,050	120,000
Income tax	61,050	20,000
Profit before income tax	150,000	100,000
Retained earnings 1 July 2020	750,000	225,000
	900,000	325,000
Dividend paid	100,000	25,000
Retained earnings 30 June 2021	800,000	300,000

Statements of financial position
	Palm Beach Limited	Happy Valley Limited
	A$	HK$
Current assets	311,520	250,000
Shares in Happy Valley Ltd	288,480	-
Property plant and equipment	700,000	300,000
Patents and trademarks	100,000	150,000
Total assets	1,400,000	700,000
Liabilities	100,000	100,000
Net assets	1,300,000	600,000
		-
Equity
Share Capital	500,000	200,000
General reserve	-	100,000
Retained earnings	800,000	300,000
Total equity	1,300,000	600,000

Additional information

(a) The dividend paid by Happy Valley Ltd (and recognised as dividend revenue of AUD $21,250 by Pam Beach Ltd) was paid on 1 May 2021.

(b) Some relevant exchange rates are as follows.

		A$
1 July 2020	HK$1 =	$ 0.80
Average for 2020-21		$ 0.82
1 June 2021		$ 0.85

Required

Translate the financial statements of Happy Valley Ltd as at 30 June 2021 into the presentation currency of Australian dollars, assuming that the functional currency is the Hong Kong dollar.