On 1 July 2019, an Australian company Afghanistan Ltd acquired all


On 1 July 2019, an Australian company Afghanistan Ltd acquired all the issued shares of Brazil Ltd, a company incorporated in the United States (US). At this date Brazil Ltd had the following account balances:

Bank loan4 000
Plant and equipment4 200
Cash and debtors   400
Inventory2 000
Retained earnings   600

Other account balances for Brazil Ltd at 30 June 2020 are as follows:

 US$  DrUS$  Cr
Share capital   2 000
Retained earnings   1 200
Bank loan   4 000
Accounts payable   1 600
Sales 10 000
Plant and equipment3 800 
Cash and debtors3 200 
Inventory1 800 
Purchases8 000 
Administration expense  300 
Depreciation expense  400 
Income tax expense  500 

Exchange rates for the year ending 30 June 2020 are as follows:

1 July 2019US$1 = A$1.50
30 June 2020US$1 = A$1.70
Average for yearUS$1 = A$1.60
Ending inventory acquired (before year end)US$1 = A$1.65


1) US dollar is the functional currency of Brazil Ltd and the Australian dollar is the presentation currency of the group:

a)             Prepare the Statement of profit or loss and other comprehensive income and the statement of financial position of the foreign operation at 30 June 2020. (10 marks)

b)        Calculate the foreign currency translation reserve. (5 marks)

explain each step with calculations

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