Aus Ltd has control over Hong Ltd.The functional currency of Hong Ltd is HK$, its domestic currency.On 28 February 20X4 Hong Ltd purchased a building for HK$8 million.Aus Ltd uses its domestic currency, the A$, as its presentation currency.
The relevant spot rates are:
28 February 20X4$\quad$$\quad$HK$1.00 = $\quad$A$0.22
1 July 20X6$\quad$$\quad$$\quad$$\quad$HK$1.00 = $\quad$ AS0.20
30 June 20X7$\quad$$\quad$$\quad$ HK$1.00 = $\quad$A$0.17
-What is the amount of this building in Aus Ltd's consolidated financial statements for the reporting period ending 30 June 20X7?
A)$1 600 000
B)$1 360 000
C)$10 000 000
D)$2 000 000

Question

Aus Ltd has control over Hong Ltd.The functional currency of Hong Ltd is HK$, its domestic currency.On 28 February 20X4 Hong Ltd purchased a building for HK$8 million.Aus Ltd uses its domestic currency, the A$, as its presentation currency.
The relevant spot rates are:
28 February 20X4$\quad$$\quad$HK$1.00  	= 	$\quad$A$0.22
1 July 20X6$\quad$$\quad$$\quad$$\quad$HK$1.00	   = $\quad$ AS0.20
30 June 20X7$\quad$$\quad$$\quad$  HK$1.00 	=  $\quad$A$0.17
-What is the amount of this building in Aus Ltd's consolidated financial statements for the reporting period ending 30 June 20X7?
A)$1 600 000
B)$1 360 000
C)$10 000 000
D)$2 000 000

Quizplus · Accepted Answer

To translate the assets of a subsidiary into the presentation currency of the parent company, we need to use the functional currency of the subsidiary and the relevant exchange rates at the end of each reporting period. 
Using the given exchange rates, we can translate the HK$8 million building into Aus Ltd's presentation currency as follows:

- At 28 February 20X4: HK$8 million x A$0.22/HK$1.00 = A$1.76 million 
- At 30 June 20X7: HK$8 million x A$0.17/HK$1.00 = A$1.36 million

Therefore, the amount of the building in Aus Ltd's consolidated financial statements for the reporting period ending 30 June 20X7 is A$1.36 million, which is option B.

Aus Ltd Has Control Over Hong Ltd \quad \quad HK$100 =

Aus Ltd Has Control Over Hong Ltd $\quad$ $\quad$ HK$100 =