Posted: May 9th, 2024

ACCG8126 CORPORATE ACCOUNTING Assessed Coursework 3

MASTER OF ACCOUNTING
(Professional)
ACCG8126 CORPORATE ACCOUNTING
Assessed Coursework 3

Assessed Coursework 3
Marks and percentages: This assessed coursework will be marked out of 10 marks and contributes towards 5% to your assessment.
Submission format: Please convert your file to PDF format and submit it using the submission link on iLearn.
Sydney Limited is an Australian manufacturer of Merino wool sweaters. To expand their business, Sydney Limited looked to foreign acquisitions to increase their market share. Therefore, on 1 July 2023, Sydney Limited acquired 100% of New York Limited, a retailer of woollen garments which was incorporated in the United States. The net assets of New York Limited on that date consisted of:
USD$
Share capital 259,200
General reserve 21,600
Retained profits 108,000
Total equity 388,800
Suppose the relevant exchange rates for the period are as follows:
US$1 = A$
1 July 2023 1.53
1 November 2023 1.48
31 December 2023 1.45
1 February 2024 1.5
30 June 2024 1.47
31 August 2024 1.52
Average for year 2023/2024 1.46
Average (July – December 2023) 1.5
Average (January – June 2024) 1.48
Average for June 2024 1.49
Additional information relating to New York Limited:
a) Sales are seasonal and do not occur evenly throughout the year. 40% of total sales are generated in the first six months from July to December and the balance from January to June.
b) All expenses occur evenly throughout the year, except for closing inventory, which was purchased on 30 June 2024, and interest on the bank loan, which is paid semi-annually (an amount of USD$4,320) on 31 December and 30 June each year.
c) The dividend was paid on 1 November 2023 and the dividend declared on balance date and will be paid on 31 August 2024.
d) An additional item of equipment was purchased on 1 November 2023 for USD$43,200. No other items of property, plant and equipment were purchased or sold during the year. All plant and equipment are depreciated on a straight-line basis at the rate of 20% p.a.
e) Land was purchased on 1 February 2024 for USD$97,200.
Required:
The functional currency is considered to be Australian Dollars (AUD$). Prepare the translation of the 30 June 2024 financial statements of New York Limited (in USD$) into Australian Dollars (AUD$). Round all numbers to the nearest whole number, ensure the rate applied and any workings are clearly shown.

US$ Rate A$
Sales 410,400
Opening Inventory 64,800
Purchases 259,200
Closing Inventory (75,600)
Cost of Goods Sold 248,400
Gross Profit 162,000
Depreciation 40,320
Interest 8,640
Other 54,720
Profit before tax 58,320
Income Tax Expense (17,496)
Profit after Tax 40,824
Opening Retained Earnings 108,000
Dividend paid (14,040)
Dividend declared (19,440)
Closing Retained Earnings 115,344

US$ Rate A$
Cash at Bank 128,088
Trade and other Receivables 119,232
Inventory 75,600
Land 97,200
Plant & Equipment 216,000
Accumulated Depreciation (75,600)
Total Assets 560,520
Trade and other payables 60,480
Current Tax Liability 17,496
Bank Loan 86,400
Total Liabilities 164,376
Net Assets 396,144
Share Capital 259,200
Retained Earnings 115,344
General Reserve 21,600
Total Equity 396,144.

The functional currency of New York Limited is Australian Dollars (AUD). To translate the financial statements from USD to AUD, the relevant exchange rates are applied to the respective items. The process of translating foreign currency financial statements is known as the “translation method” (Deegan, 2019).
Income Statement for the year ended 30 June 2024 (in AUD)
Sales (410,400 x 1.46) 598,784
Cost of Goods Sold (248,400 x 1.46) 362,664
Gross Profit 236,120
Depreciation (40,320 x 1.46) 58,867
Interest Expense (8,640 x 1.46) 12,614
Other Expenses (54,720 x 1.46) 79,891
Profit before Tax 84,748
Income Tax Expense (17,496 x 1.46) 25,544
Profit after Tax 59,204
Statement of Financial Position as at 30 June 2024 (in AUD)
Assets
Cash at Bank (128,088 x 1.47) 188,489
Trade and Other Receivables (119,232 x 1.47) 175,271
Inventory (75,600 x 1.47) 111,132
Land (97,200 x 1.5) 145,800
Plant & Equipment (216,000 x 1.47) 317,512
Less: Accumulated Depreciation (75,600 x 1.47) (111,132)
Total Assets 827,072
Liabilities
Trade and Other Payables (60,480 x 1.47) 88,906
Current Tax Liability (17,496 x 1.46) 25,544
Bank Loan (86,400 x 1.47) 127,008
Total Liabilities 241,458
Net Assets 585,614
Equity
Share Capital (259,200 x 1.53) 396,576
Retained Earnings 167,438
General Reserve (21,600 x 1.53) 33,048
Total Equity 585,614
The translation process follows the guidelines provided by the Australian Accounting Standards Board (AASB) and the International Accounting Standards Board (IASB) (Deegan, 2019; AASB, 2022; IASB, 2023). The financial statements are translated using the closing rate for assets and liabilities, and the average rate for income and expenses (Deegan, 2019; AASB, 2022; IASB, 2023).
References:
AASB. (2022). AASB 121 The Effects of Changes in Foreign Exchange Rates. Australian Accounting Standards Board. https://www.aasb.gov.au/admin/file/content105/c9/AASB121_07-04_COMPoct19_01-18.pdf
Deegan, C. (2019). Australian financial accounting (9th ed.). McGraw-Hill Education.
IASB. (2023). IAS 21 The Effects of Changes in Foreign Exchange Rates. International Accounting Standards Board. https://www.ifrs.org/issued-standards/list-of-standards/ias-21-the-effects-of-changes-in-foreign-exchange-rates/
Pinto, J. A., & Henry, E. (2020). Equity asset valuation (4th ed.). John Wiley & Sons.
Stickney, C. P., Weil, R. L., Schipper, K., & Francis, J. (2018). Financial accounting: An introduction to concepts, methods, and uses (15th ed.). Cengage Learning.

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