Question 17.1

Translation into functional currency

Sydney Ltd is a manufacturer of sheepskin products in Australia. It is a wholly-owned subsidiary of a Hong Kong company, Wan Chai Ltd. The following assets are held by Sydney Ltd at 30 June 2017:

 Plant Cost A\$ Useful life(years) Acquisition date Exchange rate on acquisition date(A\$1 = HK\$) Tanner 40 000 5 10/08/2013 5.4 Benches 20 000 8 08/03/2015 5.8 Presses 70 000 7 06/10/2016 6.2

Plant is depreciated on a straight-line basis, with zero residual values. All assets acquired in the first half of a month are allocated a full month’s depreciation.

Inventory:

• At 1 July 2016, the inventory on hand of \$25 000 was acquired during the last month of the 2015–16 period.
• Inventory acquired during the 2016–17 period was acquired evenly throughout the period. Total purchases of \$420 000 were acquired during that period.
• The inventory of \$30 000 on hand at 30 June 2017 was acquired during June 2017.

Relevant exchange rates (quoted as A\$1 = HK\$) are as follows:

 Average for June 2016 7.2 01-Jul-16 7 Average for 2016-17 7.5 Average for June 2017 7.7 30-Jun-17 7.8

Required

1. Assuming the functional currency for Sydney Ltd is the A\$, calculate:

(a) the balances for the plant items and inventory in HK\$ at 30 June 2017

(b) the depreciation and cost of sales amounts in the statement of profit or loss and other comprehensive income for 2016–17.

1. Assuming the functional currency is the HK\$, calculate:

(a) the balances for the plant items and inventory in HK\$ at 30 June 2017

(b) the depreciation and cost of sales amounts in the statement of profit or loss and other comprehensive income for 2016–17.

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