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5. Founded in Libyan with its currency in the Dinar, Abu Musa Bhd has a subsidiary in Kongostan with its currency in the Dirham, which is a subsidiary of Abu Musa Bhd. As of the beginning of the year, the exchange rate is three dirhams to one dinar of Libyan currency. By year's end, the exchange rate is 2.5 Dirham to 1 Libyan Dinar, as the Dirham appreciates in value. The balance sheets of the subsidiary at two periods in time and the year-end income statement are as follows (in thousands): Abu Musa Bhd Balance Sheet As at 2022/2021 ( in Dinar) Item Cash Receivables Inventories (FIFO) net Fixed Asset Total Current Libilities Common Stock Retained Earning Total 2021 300 1800 1500 2100 5700 2000 600 3100 5700 2022 400 2200 2000 1800 6400 1900 600 3900 6400 Abu Musa Bhd For the Year ended 2022/2021 (In Dinar) Sales Cost Of Good Sold Depreciation Expenses Taxes Operating Income 10400 6000 300 2400 900 800 The historical exchange rate for the fixed assets is 3 Dirham to the 1 Dinar. The historical- cost exchange rate for inventories and cost of goods sold, using the Dinar as the functional currency, is 2.70 Dirham to the 1 Dinar. Using Dirham as the functional currency, it is 2.60 Dirham to the 1 Dinar for purposes of cost of goods sold. The average exchange rate for the year is 2.75 Dirham to the 1 Dinar, and sales, depreciation, expenses, and taxes paid are steady throughout the year. Also assume no previous translation adjust- ments. On the basis of this information and assuming that the functional currency is the Dirham, determine the balance sheet for 31 Dec 2022 and income statement for the year (to the nearest thousand Dinars). Now, reconstruct these statements assuming that the functional currency is the Dinar. What differences do you observe? 5. Founded in Libyan with its currency in the Dinar, Abu Musa Bhd has a subsidiary in Kongostan with its currency in the Dirham, which is a subsidiary of Abu Musa Bhd. As of the beginning of the year, the exchange rate is three dirhams to one dinar of Libyan currency. By year's end, the exchange rate is 2.5 Dirham to 1 Libyan Dinar, as the Dirham appreciates in value. The balance sheets of the subsidiary at two periods in time and the year-end income statement are as follows (in thousands): Abu Musa Bhd Balance Sheet As at 2022/2021 ( in Dinar) Item Cash Receivables Inventories (FIFO) net Fixed Asset Total Current Libilities Common Stock Retained Earning Total 2021 300 1800 1500 2100 5700 2000 600 3100 5700 2022 400 2200 2000 1800 6400 1900 600 3900 6400 Abu Musa Bhd For the Year ended 2022/2021 (In Dinar) Sales Cost Of Good Sold Depreciation Expenses Taxes Operating Income 10400 6000 300 2400 900 800 The historical exchange rate for the fixed assets is 3 Dirham to the 1 Dinar. The historical- cost exchange rate for inventories and cost of goods sold, using the Dinar as the functional currency, is 2.70 Dirham to the 1 Dinar. Using Dirham as the functional currency, it is 2.60 Dirham to the 1 Dinar for purposes of cost of goods sold. The average exchange rate for the year is 2.75 Dirham to the 1 Dinar, and sales, depreciation, expenses, and taxes paid are steady throughout the year. Also assume no previous translation adjust- ments. On the basis of this information and assuming that the functional currency is the Dirham, determine the balance sheet for 31 Dec 2022 and income statement for the year (to the nearest thousand Dinars). Now, reconstruct these statements assuming that the functional currency is the Dinar. What differences do you observe

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