Question

The accounts listed below are for the foreign subsidiary of an Australian company. Indicate the exchange rate that would be used to translate the foreign currency balances of these accounts into Australian dollars assuming:

1. The Australian dollar is the functional currency.
2. The foreign currency is the functional currency; and

In the table provided below, use the following letters to indicate the appropriate exchange rate:

            H – historical exchange rate

            C – current exchange rate at the end of the current period

            A – average exchange rate for the current period

Answer for Question 2 Part B:

Account	A$ is the functional currency	The foreign currency is the functional currency
Cost of sales
General Reserve
Patents and Trademarks
Goodwill
Deferred Tax Asset
Motor Vehicles (MV)
Inventory
Accumulated Deprec - MV
Rent Expense
Depreciation expense

Answer 1

Account	A$ is the functional currency	The foreign currency is the functional currency
Cost of sales	H	A
General Reserve	H	H
Patents and Trademarks	H	H
Goodwill	H	C
Deferred Tax Asset	H	C
Motor Vehicles (MV)	H	H
Inventory	H	C
Accumulated Deprec - MV	H	H
Rent Expense	H	A
Depreciation expense	H	A

Note:

If Australian dollar is a functional currency then they are not foreign currency transactions. So, recorded at historical rate.

If foreign currency is a functional currency then it is a foreign currency transaction & classification of monetary & non monetary items has to be made in order to determine the Exchange Rate.