Translation into functional and presentation currency    LO4, 5 On 1 July 2020, Basil Ltd, an Australian company, acquired all the issued shares of Fawlty Ltd, an UK company. At this date, the equity of Fawlty Ltd consisted of the following. £ Share capital 800 000 Retained earnings 200 000 The financial statements of Fawlty Ltd at 30 June 2021 were as follows. Statement of comprehensive income for Fawlty Ltd for the year ended 30 June 2021 £ Sales 2 000 000 Cost of sales Opening inventories (400 000) Purchases (900 000) Ending inventories 200 000 (1 100 000) Depreciation (100 000) Other expenses (500 000) Profit before tax 300 000 Income tax expense (100 000) Profit after tax 200 000 Statement of financial position for Fawlty Ltd as at 30 June 2021 £ Plant and equipment 1 500 000 Accumulated depreciation (300 000) 1 200 000 Cash 100 000 Inventories 200 000 Accounts receivable 100 000 Total assets 1 600 000 Accounts payable 100 000 Bank loan 300 000 Total liabilities 400 000 Net assets 1 200 000 Share capital 800 000 Retained earnings 400 000 Additional information • Exchange rates for the year ended 30 June 2021 were as follows (£1 = A$). 1 July 2020 1.90 1 March 2021 1.92 1 April 2021 1.88 1 May 2021 1.94 Average for May–June 2021 1.95 Average for 2020–21 1.89 30 June 2021 1.86 • Sales, purchases and other expenses were incurred evenly throughout the year. • The ending inventory was acquired on 1 March 2021 by paying cash of £20 000 and the balance on credit. • The plant at 30 June 2021 includes a new plant acquired for £120 000 on 1 May 2021 by paying cash. • Depreciation on plant and equipment is calculated at 10% p.a. on cost. • The bank loan was taken out on 1 April 2021, with interest rate at 8% p.a. paid quarterly on 30 June, 30 September, 31 December and 31 March each year. The interest expense on the loan for the year was included under ‘Other expenses’ in the statement of comprehensive income. Required 1. Assuming the functional currency for Fawlty Ltd is the Australian dollar, translate the financial statements of Fawlty Ltd into the functional currency. 2. Assuming the functional currency for Fawlty Ltd is the UK pound and the presentation currency of Basil Ltd’s group is Australian dollars, translate the financial statements of Fawlty Ltd into the presentation currency.