Financial statement

[Ahlam Mohamed]

A UK company prepares financial statements to 31 December and has the pound sterling as a functional currency. On November 2015, the company buys inventory for $7,440. The company still holds the inventory as at 31 December 2015 when its net realizable value is £7000 and does not pay for the inventory until 16 February 2016.

Explain how this transaction should be recorded on 27 November 2015.

Explain how any item outstanding on 31 December 2015 should be shown in the company’s statement of financial position at that date and how any exchange differences should be dealt with in the company’s financial statement.

Explain how the payment on 16 February should be accounted for.Hints: £1=$1.50 on 27 Nov 2015; £1 = $1.60 on 31 Dec 2015; £1 = $1.55 on Feb 2016.

How to solve this ?!!! Please need your help