On 1 July 2021 Raymond Electronics Pty Ltd, an Australian company, acquires all of the issued shares in Therapeutic Plastics Plc, a company incorporated in England. The relevant exchange rates for the year ending 30 June 2022 are as follows:

01 July 2021	1.00 = A$3.10
Average rate for the year	1.00 = A$3.15
Ending inventory acquired (before year end)	1.00 = A$3.25
30 June 2022	1.00 = A$3.20

The statement of profit or loss and other comprehensive income and statement of financial position for the Therapeutic Plastics Plc are shown below. The accounts are stated in UK.

The statement of profit or loss and other comprehensive income for Therapeutic Plastics Plc for the year ending 30 June 2022:

	UK
Sales	75,000
Cost of sales
Inventory1 July 2021	(10,000)
Purchases	(60,000)
Inventory30 June 2022	15,000
Administration expense	(5,000)
Depreciation expense	(3,500)
Profit before tax	11,500
Income tax expense	(3,500)
Profit after tax	8,000

The statement of Financial Position for Therapeutic Plastics Plc as at 30 June 2022

	1 July 2021	30 June 2022
	UK	UK
Plant and equipment	16,000	12,500
Cash and debtors	4,000	15,000
Inventory	6,000	15,000
	26,000	42,500
Share capital	15,000	17,000
Retained earnings	3,500	11,500
Bank loan	4,500	9,500
Accounts payable	3,000	4,500
	26,000	42,500

Required:

1. You need to describe the exchange rates you have used for translating elements of these financial statements. [05 Marks]
2. Translate the financial statements of the foreign operation, assuming that the Australian dollar is the presentation currency of the group. In this part of the question, you need to translate the financial statements from the local currency (UK pounds) into the presentation currency of Raymond Electronics Pty Ltd in Australia (in Australian dollars). [20 Marks]

Answer rating: 100% (QA)

Answer a Description of the exchange rates used for translating the financial statements 1 Acquisiti... View the full answer