Question
TRANSLATION OF FOREIGN OPERATIONS QUESTION On 1 July 2021, Corkie Ltd, an Australian company, acquired all the issued shares in Doogan Ltd, a company incorporated
TRANSLATION OF FOREIGN OPERATIONS
QUESTION
On 1 July 2021, Corkie Ltd, an Australian company, acquired all the issued shares in Doogan Ltd, a company incorporated overseas. Exchange rates for the year ending 30 June 2022 are as follows:
1 July 2021 | FC $1.00 = A$1.15 |
Average rate for the Year | FC $1.00 = A$1.17 |
Ending Inventory Acquired (before year end) | FC $1.00 = A$1.20 |
30 June 2022 | FC$1.00 = A$1.22 |
The statement of profit and loss and other comprehensive income and statement of financial position for Doogan Ltd are provided as follows. The accounts are stated in FC (foreign currency) dollars which is Doogan Ltds functional currency.
Statement of Profit and Loss and Other Comprehensive Income
Doogan Ltd For the year ending 30 June 2022
FC$ | |
Sales | 30 000 000 |
Less Cost of Goods Sold: | |
Inventory 1 July 2021 | 6 000 000 |
Add Purchases | 24 000 000 |
Less Inventory 30 June 2022 | -5 400 000 |
Cost of Goods Sold | 24 600 000 |
Gross Profit | 5 400 000 |
Less Expenses: | |
Administration | -900 000 |
Depreciation | -1 200 000 |
Net Profit Before Tax | 3 300 000 |
Less Income Tax Expense | 1 500 000 |
Net Profit after Tax | 1 800 000 |
Other Comprehensive Income | - |
Comprehensive Income | 1 800 000 |
Doogan Ltd
Statement of Changes in Equity for the year ending 30 June 2022
Share Capital FC$ | Retained Earnings FC$ | |
Balance as at 30 June 2021 | 6 000 000 | 1 800 000 |
From statement of profit and loss and other comprehensive income | 1 800 000 | |
Balance as at 30 June 2022 | 6 000 000 | 3 600 000 |
Statement of Financial Position for Doogan Ltd
As at 30 June 2022
FC$ | |
Share Capital and Reserves | |
Paid Up Capital | 6 000 000 |
Retained Earnings | 3 600 000 |
Total Equity | 9 600 000 |
Current Liabilities | |
Trade Creditors | 4 800 000 |
Non Current Liabilities | |
Bank Loan | 12 000 000 |
Total Liabilities | 16 800 000 |
Total Liabilities and Equity | 26 400 000 |
Current Assets | |
Cash at Bank | 1 200 000 |
Trade Debtors | 8 400 000 |
Inventory | 5 400 000 |
Non Current Assets | |
Plant and Equipment | 11 400 000 |
Total Assets | 26 400 000 |
Required1.
- Prepare a translation of the statement of profit and loss and other comprehensive income of Doogan Ltd (functional currency) into the presentation currency of the group (Australian dollars). Round each calculation to the nearest whole dollar.
2. Prepare a translation of the statement of changes in equity of Doogan Ltd (functional currency) into the presentation currency of the group (Australian dollars). Round each calculation to the nearest whole dollar.
3. Provide the calculations to determine if the translation results in a foreign exchange gain or loss.
4. Prepare a translation of the statement of financial position from a functional currency into a presentation currency.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started