Question

Blue Ltd, an Australian company, incorporated a foreign subsidiary Grey Ltd on 1 July 20X1 with capital contribution of FC $100,000. ‘FC’ is a foreign currency used as the functional currency of Grey Ltd. The presentation currency of the Blue Group is AUD. The trial balance of Grey Ltd in FC at 30 June 20X2 is as follows:

Grey Ltd Trial balance at 30 June 20X2
	FC		FC
	DR.		CR.
Total assets	400,000
Total liabilities			200,000
Issued capital			100,000
Sales			160,000
Cost of sales	20,000
Cash expenses	30,000
Depreciation	10,000
	460,000		460,000

Included in the total assets is a building purchased on 1 July 20X1 with FC$800,000.

Payment of the cash expense was made on 1 October 20X1.

Sale, purchase and other expenses were incurred evenly throughout the year.

No dividends were paid or declared by Grey Ltd during the year.

Ignore income tax

Exchange rates at various dates during 20X2 are as follows:

1-Jul-20X1	FC 1.00 = AUD $2.00
1-Oct-20X1	FC 1.00 = AUD $2.10
30-Jun-20X2	FC 1.00 = AUD $2.30
Average rate of FY20X2	FC 1.00 = AUD $2.20

Required:

Calculate the translated ending balance in AUD for the “Foreign Currency Translation Reserve” account in the translated statement of financial position for Grey Ltd as at 30 June 20X2

Answer 1

Note. Sorry for correction. It's mentioned in the question that Building value is 800,000 which is included in Total assets 400,000. If building value alone is 800,000, then total assets should be more than 800,000. So I have taken the building value as FC 80,000. The valus of remaining asset will be FC 320,000.   

Items	Rate to be used	Rate
Building	Rate on the date of purchase	2.00
Other assets*	Rate at the year end (30th June 20X2)	2.30
Total Liabilities*	Rate at the year end (30th June 20X2)	2.30
Issued capital	Rate on the date of issue	2.00
Sales	Avg rate	2.20
Cost of Sales	Avg rate	2.20
Cash expenses	Date it is incurred (1st Oct 20X1)	2.10
Depeciation	Rate on the date of purchase	2.00

Trial balance (in AUD)

Particulars	Debit	Credit
Building	160,000
Other assets	736,000
Total Liabilities		460,000
Issued Capital		200,000
Sales		352,000
Cost of Sales	44,000
Cash expenses	63,000
Depreciation	20,000
Foreign Currency Translation Reserve		11,000
Total	102,3000	102,3000

Statement of P&L

Particulars	Debit	Particulars	Credit
Cost of Sales	44,000	Sales	352,000
Cash Expenses	63,000
Depreciation	20,000
Profit	225,000
	352,000		352,000

Statement of Financial Position as at 30th June 20X2 for Grey Ltd.

Particulars	Liabilities	Particulars	Assets
Issued Capital	200,000	Building	160,000
Reserves & Surplus		Other Assets	736,000
Profit for year 20X1 - 20X2	225,000
Foreign Currency Translation Reserve	11,000
Total Liabilities	460,000
Total	896,000	Total	896,000