Mortimer Limited has the following items in its statement of profit or loss and other comprehensive income: Revenue FC60 000,
Cost of goods sold FC25 000,
Interest expense FC8 000,
Income tax expense FC10 000.
All items arose evenly across the year. The following exchange rates applied:
$\begin{array}{lll}
\text { End of reporting period } & F C 1= & \$ 0.80 \
\text { Average rate for year } & F C 1= & \$ 0.75
\end{array}$
The net profit after tax translated into the presentation currency is:
A) $12 750;
B) $13 600;
C) $21 250;
D) $26 667.

Question

Quizplus · Accepted Answer

The net profit after tax in functional currency is FC17,000 (Revenue FC60,000 - Cost of goods sold FC25,000 - Interest expense FC8,000 - Income tax expense FC10,000). Using the average exchange rate of FC1 = $0.75, the translated net profit is $12,750 (FC17,000 * $0.75).

Mortimer Limited Has the Following Items in Its Statement of Profit