B407F Week 12 Tutorial question

B407F Week 12 Tutorial question - B407F Week 12 Tutorial -...

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B407F Week 12 Tutorial - Effect of changes in foreign exchange rates Question 1 Roland Limited ("RL") has Hong Kong Dollar ("HK$") functional currency and presentation currency. On 1 January 2008, RL entered into a contract to acquire a printing machine from a French supplier at a consideration of EURO 10 million. A 30% deposit was paid on 1 February 2008. RL received the printing machine on 1 April 2008. The remaining 70% consideration was paid on 30 September 2008 in accordance with the contract. Depreciation is provided to write off the cost of the printing machine over 10 years using the straight-line method. Exchange rates of EURO 1 at the dates below were: 1 January 2008 HK$11.6 1 February 2008 HK$11.7 1 April 2008 HK$11.5 30 September 2008 HK$11.3 31 December 2008 HK$11.8 Average rates of EURO 1 for the periods below were: 1 April to 30 September 2008 HK$11.35 1 April to 31 December 2008 HK$11.4 Required: (a) Prepare all the journal entries that RL should make for the year ended 31 December 2008. (b) Explain the implication for the statement of financial position at 31 December 2008 and the statement of comprehensive income for the year ended 31 December 2008 if RL chooses the EURO as its presentation currency. (HKICPA Module A- May 2009)
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Question 2 XY, a public limited company, owns 80% of AG, a public limited company which is situated in another country. The currency of this country is the Kram (KR). XY acquired AG on 1 January Year 1 for $ 220 million when the retained profits of AG were KR 610 million. AG has not issued any share capital since acquisition. The
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B407F Week 12 Tutorial question - B407F Week 12 Tutorial -...

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