ACC322

PQ 17.8                          Translation to presentation currency

On 1 July 2017, Westland Limited an Australian company acquired the issued shares of Bull Limited a company incorporated in the United States. The draft statement of profit or loss and other comprehensive income and statement of financial position of Bull Ltd at 30 June 2018 was as follows:

 

US$ US$
Sales revenues 1,600,000
Cost of sales:
Opening inventory 140,000
Purchases 840,000
980,000
Closing inventory 280,000 700,000
Gross profit 900,000
Expenses:
Depreciation 90,000
Other 270,000 360,000
Profit before income tax 540,000
Income tax expense 200,000
Profit 340,000
Retained earnings as at 1 July 2017 200,000
540,000
Dividend paid 120,000
Dividend declared 200,000 320,000
Retained earnings as at 30 June 2018 220,000
2018 2017
US$ US$
Current assets:
Inventory 280,000 140,000
Accounts receivable 20,000 130,000
Cash 20,000 570,000
Total current assets 320,000 840,000
Non-current assets:
Patent 80,000 80,000
Plant 720,000 600,000
Accumulated depreciation -130,000 -80,000
Land 500,000 300,000
Buildings 920,000 820,000
Accumulated depreciation -120,000 -80,000
Total non-current assets 1,970,000 1,640,000
Total assets 2,290,000 2,480,000
Current liabilities:
Provisions 500,000 620,000
Accounts payable 320,000 940,000
Total current liabilities 820,000 1,560,000
Non-current liabilities:
Loan from Echidna Ltd 530,000
Total liabilities 1,350,000 1,560,000
Net assets 940,000 920,000
Equity:
Share capital 720,000 720,000
Retained earnings 220,000 200,000
Total equity 940,000 920,000

 

Additional information

(a) On 1 January 2018, Bull Ltd acquired new plant for US$120,000. This plant is depreciated over a 5-year period.

(b) On 1 April 2018, Bull Ltd acquired US$200,000 worth of land.

(c) On 1 October 2017, Bull Ltd acquired US$100,000 worth of new buildings. These buildings are depreciated evenly over a 10-year period.

(d) The interim dividend was paid on 1 January 2018, half of which was from profits earned prior to 1 July 2017, while the dividend payable was declared on 30 June 2018.

(e) Sales, purchases and expenses occurred evenly throughout the period. The inventories on hand at 30 June 2018 were acquired during June 2018.

(f) The loan of US$530,000 from Westland Limited was granted on 1 July 2017. The interest rate is 8% p.a. Interest is paid on 30 June and 1 January each year.

The exchange rates for the financial year were as follows:

 

US$1 = A$
1 July 2017 2.00
1 October 2.017 1.80
1 January 2018 1.70
1 April 2.018 1,60
30 June 2018 1.50
Average June 2.018 1.52
Average for 2017-18 1,75

 

Required

  1. If the functional currency for BULL LIMITED is the US dollar, prepare the financial statements of BULL LIMITED at 30 June 2018 in the presentation currency of the Australian dollar.
  2. Verify the foreign currency translation adjustment.

 

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