Lennon Ltd has two foreign operations based in Japan. The following information was extracted from the foreign operation's accounts for the period ended 30 June 2015:

Exchange rate information is:

The translation from Japanese Yen to Australian dollars resulted to the following balances (rounded to the nearest ¥000):

Which of the following translation processes were applied to Yoko Ltd and Ono Ltd, respectively, for the year ended 30 June 2015?
A) Functional currency; Presentation currency;
B) Functional currency; Functional currency;
C) Presentation currency; Functional currency;
D) Presentation currency; Presentation currency;
E) None of the given answers.

Question

Lennon Ltd has two foreign operations based in Japan. The following information was extracted from the foreign operation's accounts for the period ended 30 June 2015:

Exchange rate information is:

The translation from Japanese Yen to Australian dollars resulted to the following balances (rounded to the nearest ¥000):

Which of the following translation processes were applied to Yoko Ltd and Ono Ltd, respectively, for the year ended 30 June 2015?
A) Functional currency; Presentation currency; 
B) Functional currency; Functional currency; 
C) Presentation currency; Functional currency; 
D) Presentation currency; Presentation currency; 
E) None of the given answers.

Quizplus · Accepted Answer

The functional currency is the currency of the primary economic environment in which the entity operates, and the presentation currency is the currency in which the financial statements are presented. Yoko Ltd and Ono Ltd both have their functional currency as Japanese Yen, as they operate in Japan, and their presentation currency as Australian dollars, as specified in the question. Therefore, process A, where the first currency is the functional currency and the second currency is the presentation currency, was applied to both foreign operations.

Lennon Ltd Has Two Foreign Operations Based in Japan