Question: Part A. Explain functional currency and suggest one indicator that an entitymay consider to determine its functional currency. (4 marks) Part B. On 1 December

Part A.

Explain "functional currency" and suggest one indicator that an entitymay consider to determine its functional currency.

(4 marks)

Part B.

On 1 December 2019, Company EX, with a functional currency and presentation currency in HKD, sold and deliver an inventory to a customer in Paris at EUR10,000. EX has received the money only in 2020.

Exchange rate of EUR/HKD was 8.79 and 8.96 respectively on 1 December 2019 and 31 December 2019.

Required:Prepare the journal entries for EX in HKD for the year ended 31 December 2019.

(4 marks)

Part C.

Company PriceBest established a wholly-owned Company Sugar on 1 January 2019. Sugar has a functional currency in USD but PriceBest requires Sugar to use SGD as its presentation currency.

Company Sugar Statement of Financial Position As at 31 December 2019

Property

Cash

Inventory

Accounts receivable

Share capital Retained earnings Accounts payable

1 January 2019

31 December 2019

Average for the year of 2019

USD 20,000

130,000 200,000 100,000 450,000

150,000 270,000 30,000 450,000

USD/SGD spot rates 1.24

1.36 1.30

Required:Translate Sugar's statement of financial position as at 31 December 2019from USD to SGD using the closing rate method.

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