Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

QUESTION ONE: ACCOUNTING FOR FOREIGN CURRENCY On 1 April 2018, Kiwi Limited, a New Zealand firm, acquired all of the issued shares of Rome Limited,

QUESTION ONE: ACCOUNTING FOR FOREIGN CURRENCY

On 1 April 2018, Kiwi Limited, a New Zealand firm, acquired all of the issued shares of Rome Limited, located in Italy. Rome Limited prepares its financial statements using the Euro () as its functional currency and its financial statements for the year ended 31 March 2019 are shown in the Appendix to this examination paper. Additional information: Relevant exchange rates were as follows: 1 April 2018 1.00 = NZ$1.48 31 March 2019 1.00=NZ$1.56 Average rate for financial year 2018-19 1.00 = NZ$1.53 Dividends were declared and paid on 15 December 2018 when the exchange rate was 1.00 = NZ$1.55. The opening inventory was on hand at the time of the acquisition. The closing inventory was acquired when the exchange rate was 1.00 = NZ$1.45 Assume that sales, purchases and other expenses were incurred evenly throughout the year. Also assume that taxes were incurred evenly throughout the year. Required: Using the worksheet provided , translate the Rome Limited financial statements into the New Zealand dollars (NZ$) the presentation currency of the Kiwi Limited group in preparation for consolidation. Show the computation of any foreign currency translation reserve.

PLEASE explain clear your answer and show calculation each step

image text in transcribed

image text in transcribed

WORKSHEET FOR QUESTION ONE Rome Company Translated Statement of Financial Performance for the Year Ended 31 March 2019 Functional Exchange NZ NZ ('000) Currency rate $('000) $('000) ('000) Sales 1,500 Opening Stock 250 Purchases 985 Closing Inventory (155) Cost of Goods Sold (1,080) Gross Profit 420 Depreciation (270) Other Expenses (50) Operating Profit before tax 100 Income tax@30% (30) Operating Profit after tax 70 Retained Earnings 1/4/2018 3,500 Dividend proposed (20) Retained Earnings 31/3/2019 3,550 Rome Company Translated Statement of Financial Position as at 31 March 2019 Functional Exchange NZ Currency rate $('000) ('000) Assets Plant Assets (net) 3,200 Inventory 155 Cash and Accounts Receivable 4,045 Total Assets 7,400 Liabilities and Equity Contributed Capital 2,220 Retained Earnings 3,550 Current Liabilities 1,100 Notes Payable 530 Foreign Currency Translation Reserve* Total Liabilities and Equity 7,400

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Impact Of Globalization On International Finance And Accounting

Authors: David Procházka

1st Edition

3319687611, 9783319687612

More Books

Students also viewed these Accounting questions