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In: Accounting

(a) Tobaco Berhad, with the Ringgit Malaysia as its functional currency, purchases plant from a foreign...

(a) Tobaco Berhad, with the Ringgit Malaysia as its functional currency, purchases plant from a foreign entity for $18 million on 31 May 2019 when the exchange rate was $2 to RM1. The entity also sells goods to a foreign customer for $10.5million on 30 September 2019, when the exchange rate was $1.75 to RM1. At the entity’s year end of 31 December 2019, both amounts are still outstanding and have not been paid. The closing exchange rate was$1.5 to RM1.

Required:

Explain the accounting treatment for both sale and purchases transactions for Tobacco Berhad. [5 marks]

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