Question

On 1 January 2018, Entity P1 acquired the entire share capital of entity S1. The functional currencies of entities S1 and P1 are US$ and S$ (also presentation currency of P1) respectively. The net assets of S1 on 1 January 2018 were US$1,340,000. The financial statements of entity S1 on 31 December 2018 are as follows:

Statement of financial position (in US$) As of 31 December 2018

Current Assets
Cash	40,000
Accounts receivable	780,000
Inventory	230,000
Fixed assets
Building	1,800,000
Equipment	600,000
Total Assets	3,450,000
Current liabilities
Accounts payable	530,000
Non-current liabilities
Loan payable	940,000
Shareholder's equity
Share capital	1,340,000
Retained earnings	640,000
Total liabilities and equity	3,450,000

Income Statement (in US$) For year ended 31 December 2018
Sales revenue	6,600,000
Cost of goods sold	(5,400,000)
Gross profit	1,200,000
Operating expenses	(420,000)
Net profit before tax	780,000
Tax expense	(140,000)
Net income after tax	640,000
The US$/S$ exchange rates are as follows: 1 January 2018	1.42
31 December2018	1.48
Average for year 2018	1.45

Required

Prepare the translated 2018 financial statements of entity S1 in presentation currency.

Answer 1

Ans:

Financial Statement as on December 2018
	(Value in S$)
Current Assets
Cash	59,200.00
Accounts receivable	11,54,400.00
Inventory	3,40,400.00
Fixed Assets
Building	26,64,000.00
Equipment	8,88,000.00
Total Assets	51,06,000.00
Current Liabilities
Accounts Payable	7,84,400.00
Non-current liabilities
Loan Payable	13,91,200.00
Shareholder's Equity
Share capital	19,02,800.00
Retained Earnings	10,27,600.00
Total Liabilities	51,06,000.00

Income Statement (in S$)
For year ended 31 December 2018
Particulars	Amount in S$
Sales Revenue	95,70,000.00
Less: Cost of goods sold	78,30,000.00
Gross Profit	17,40,000.00
Less: Operating Expenses	6,09,000.00
Net Profit before taxation	11,31,000.00
Less: Tax Expense	2,03,000.00
Net Income after Tax before Foreign exchange adjustment	9,28,000.00
Foreign Exchange Difference (Gain)	99,600.00
Net income	10,27,600.00

Working Note: Trail Balance as on 31st December 2018
Particulars	Debit US$	Credit US$	Exchange Rate	Debit S$	Credit S$
Cash	40,000.00		1.48	59,200.00
Accounts receivable	7,80,000.00		1.48	11,54,400.00
Inventory	2,30,000.00		1.48	3,40,400.00
Building	18,00,000.00		1.48	26,64,000.00
Equipment	6,00,000.00		1.48	8,88,000.00
Accounts Payable		5,30,000.00	1.48		7,84,400.00
Loan Payable		9,40,000.00	1.48		13,91,200.00
Share capital		13,40,000.00	1.42		19,02,800.00
Sales		66,00,000.00	1.45		95,70,000.00
Cost of goods sold	54,00,000.00		1.45	78,30,000.00
Operating expenses	4,20,000.00		1.45	6,09,000.00
Tax expenses	1,40,000.00		1.45	2,03,000.00
Exchange Differences					99,600.00
	94,10,000.00	94,10,000.00		137,48,000.00	137,48,000.00
Note:
Balance sheet itemes	Closing rate	1.48
Income statement items	Average rate	1.45
Share capital (net assets), opening balance is same as at end. Specifically given in question. Hence, opening rate considered. Ie 1.42