XIN MMM HAIR QUESTION 4 (25 Marks) On 1 January 2019, Lavender Bhd established a wholly owned subsidiary, Angkasa Ltd in Labuan, by subscribing for US$2,000,000.00 of Angkasa's equity shares. Angkasa's activities are mainly in providing services to international firms. Its revenue and operating expenses are denominated mainly in the US dollar. The currency of the primary economic environment in which Angkasa operates is the US dollar On January 2019, Angkasa used US$500,000 to purchase an office building in Labuan at a cost of RM2,000,000.00. Also, on that date, it used US$500,000.00 to place a fixed deposit of RM2,000,000.00 with a Malaysian bank. The balance of the US dollar of US$1,000,000.00 was paid for professional fees and other operating expenses. Revenue generated from the services was US$2,000,000.00 of which US$1,000,000.00 was received in cash and the balance in the trade receivable account. Angkasa's accounting records are kept in the US dollar. The summarized accounts of Angkasa Ltd for the year ended 31 December 2019 are as follows: Functional Currency USS Revenue 2,000,000.00 Expenses (1,000,000.00) Exchange loss on Ringgit deposit (100,000.00) Retained profit 900,000.00 Equity capital 2,000,000.00 2,900,000.00 Office building 500,000.00 Ringgit bank balance (2,000,000/5) 400,000.00 US dollar bank balance 1,000,000.00 Trade receivables 1,000,000.00 (2,900,000.00) The exchange rates between US dollar and Ringgit were as follows: Ringgit per USS 1 January 2019 4.0 Average for the year 4.5 31 December 2019 5.0 REQUIRED: a. Explain how the functional currency concept should be applied in financial statements of Angkasa Ltd. [10 marks) . If Angkasa chooses to present its financial statements in the Ringgit, translate the US dollar financial statements of Angkasa Lid for presentation purposes. [15 Marks) EXHit A ELL