Cases
Practical case
Vinoteca Ibérica SA (fictitious entity) sells wine to customers in the euro area and closes its books on 31 December 20X5. On 15 November 20X5 it buys from a US supplier a batch of barrels for resale, invoiced in US dollars (USD) and payable on credit. The payable is settled on 20 January 20X6. The accounting department must determine the functional currency, record the purchase, remeasure the payable at closing, then record the settlement.
Your assignment
Identify the entity's functional currency and the nature of the payable; translate the purchase at the spot rate and record it; remeasure the payable at closing, compute the exchange difference and record it; translate the settlement, compute the settlement difference and record the payment; present the cumulative effect on the financial statements; conclude.
Work on this file as you would in practice: read the situation, open the documents, sort the useful information, then carry out the work requested. The solution is revealed once you submit.
Fundamental level: the method, help and references are shown.
Method
File checklist
4 documents: open each one to read it.
Document 1Table
Entity profile at 31 December 20X5: selling prices are set in euros and determined by Spanish competition and regulation; costs (wine, labour, rent) are mainly in euros; bank financing is in euros; operating receipts are kept in euros. The entity has no foreign operation.
The figures of the documents, gathered for your work.
| Item | Value | Found in |
|---|---|---|
| Invoice price in dollars | $50,000.00 | |
| Spot rate of 15 November 20X5 (EUR per 100 USD) | 92% | |
| Closing rate (EUR per 100 USD) | 95% | |
| Rate of the settlement date (EUR per 100 USD) | 96.5% | |
| Insurance premium 20X6 | €2,400.00 |
Not every document matters: identify those that affect the accounting treatment.
Part 1 · Classification · Analysis
Sort each document: does it affect the accounting treatment?
Drag each item into its category, or tap the category under the item.
Entity profile
Invoice from the US supplier
Closing and settlement rates
Insurance premium
11 tasks in the order of the file. Calculations, entries and effects on the financial statements are marked; written answers are self-assessed against the solution.
Task 1Analysis
What is the entity's functional currency, and is the dollar payable a monetary item?
Set out the facts, the question raised, then your analysis.
This answer is not marked automatically: after submitting, you will compare it with the solution.
Task 2Calculation
Translate the purchase at the spot rate of 15 November 20X5.
Start from the data in the pieces, set the formula, check the unit and the order of magnitude.
Part 1 · Calculation
Translate the purchase at the spot rate of 15 November 20X5.
Task 3Journal entries
Record the purchase.
Identify the accounts affected and the direction of each movement; check the balance.
Part 1 · Journal entry · Journal entries
Entry 1 of 1
One line = one account and one side. Add a line if the entry needs more; the balance check updates live.
Line 1
Line 2
Task 4Calculation
Translate the payable at the closing rate.
Start from the data in the pieces, set the formula, check the unit and the order of magnitude.
Part 1 · Calculation
Translate the payable at the closing rate.
Task 5Calculation
Compute the exchange difference at closing.
Start from the data in the pieces, set the formula, check the unit and the order of magnitude.
Part 1 · Calculation
Compute the exchange difference at closing.
Task 6Journal entries
Record the exchange difference at closing.
Identify the accounts affected and the direction of each movement; check the balance.
Part 1 · Journal entry · Journal entries
Entry 1 of 1
One line = one account and one side. Add a line if the entry needs more; the balance check updates live.
Line 1
Line 2
Task 7Calculation
Translate the settlement at the rate of the settlement date.
Start from the data in the pieces, set the formula, check the unit and the order of magnitude.
Part 1 · Calculation
Translate the settlement at the rate of the settlement date.
Task 8Calculation
Compute the exchange difference on settlement.
Start from the data in the pieces, set the formula, check the unit and the order of magnitude.
Part 1 · Calculation
Compute the exchange difference on settlement.
Task 9Journal entries
Record the settlement.
Identify the accounts affected and the direction of each movement; check the balance.
Part 1 · Journal entry · Journal entries
Entry 1 of 1
One line = one account and one side. Add a line if the entry needs more; the balance check updates live.
Line 1
Line 2
Line 3
Task 10Effects on the financial statements
What is the cumulative effect of the three entries on the financial statements?
For each financial statement, state the line affected, the direction and the amount.
Part 1 · Classification · Analysis
State the direction of the effect on each financial statement aggregate.
Financial position (balance sheet)
Profit or loss
Other comprehensive income
Equity
Part 2 · Calculation · Analysis
Quantify the effect on the aggregates concerned.
Result: Amount of the effect — Equity
Task 11Conclusion
Write the conclusion.
Write a conclusion that cites the facts and the treatment chosen.
This answer is not marked automatically: after submitting, you will compare it with the solution.
Your working draft for this file: points noted, leads, intermediate calculations.
Saved on this device only; never graded.
Complete every item of the file to submit it (0 / 13).
Document this file
These working papers use the data and results of this case.
Normative references