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IAS 21Case studies (Step 3 of 5)

Case study

Step 3 of 5
Practical caseIAS 21L2 · Intermediate

Machine, revalued land, average rate and advance in dollars: non-monetary items and the transaction date

5 documents12 tasks≈ 60 min
0 / 14 items completed
Standards
IAS 21 — The Effects of Changes in Foreign Exchange Rates
Assistance levelHelp on demand · assistance on request
  • Method: on request
  • Checklist: on request
  • Hints: withdrawn
  • Step-by-step work: shown

Case brief

Situation

Ateliers Nordiques SAS (fictitious entity), whose functional currency is the euro, closes its books on 31 December 20X5. It bought a machine and a plot of land in the United States, sold to US customers in November and paid an advance for equipment to be delivered in 20X6, all in US dollars (USD). The accounting department must choose the appropriate rate for each item and prepare the entries.

Your assignment

For each of the four items, state its nature (monetary or not) and the rate to use; translate the cost of the machine and record it; translate the fair value of the land, isolate the exchange component of its revaluation and record the revaluation; assess the use of the November average rate and translate the sales; translate the advance and record it; present the 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.

Intermediate level: help remains available, on demand.

Method

  1. Read the brief and the assignment.
  2. Open each document and spot the relevant data.
  3. Carry out the work in the suggested order.
  4. Submit, then read the conclusion and the model answer.

File checklist

  • Open each piece (0 / 5 consulted) · to do
  • Sort the information in the pieces · to do
  • Carry out the work (0 / 14) · to do
  • Submit the file, then assess yourself · to do

Documents

File documents

5 documents: open each one to read it.

Document 1Contract

Purchase contract of the machine

Purchase contract of the machine dated 1 March 20X5: price of 200,000 USD, paid in cash the same day. Spot rate of 1 March 20X5: 0.90 EUR for 1 USD. The entity measures this machine at cost.

Data

Key data from the documents

The figures of the documents, gathered for your work.

ItemValueFound in
Price of the machine in dollars$200,000.00
Rate of 1 March 20X5 (EUR per 100 USD)90%
Cost of the land in dollars$500,000.00
Opening carrying amount of the land€450,000.00
Fair value of the land in dollars$560,000.00
Closing rate (EUR per 100 USD)95%
Change in value to record€82,000.00
Exchange component of the change€25,000.00
November sales in dollars$120,000.00
November average rate (EUR per 100 USD)90.2%
Sales recorded in euros€108,240.00
Advance paid in dollars$40,000.00
Rate of 10 October 20X5 (EUR per 100 USD)91%
Annual rent€7,200.00

Sorting the information

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.

To sort5

  • Purchase contract of the machine

  • Valuation report on the land

  • November sales journal

  • Equipment purchase contract and advance

  • Office rent

Relevant to the treatment0

    No effect0

      Questions

      Work programme

      12 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.

      1. Task 1Analysis

        For each item, what is its nature (monetary or not) and which rate should be used?

      2. Task 2Calculation

        Translate the cost of the machine.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Calculation

        Translate the cost of the machine.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      3. Task 3Journal entries

        Record the acquisition of the machine.

        Calculator

        Click in an answer field to be able to insert the result.

        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.

        1. Line 1

        2. Line 2

        TotalsDebit0Credit0

      4. Task 4Calculation

        Translate the fair value of the land.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Calculation

        Translate the fair value of the land.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      5. Task 5Calculation

        Isolate the component of the revaluation other than exchange.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Calculation

        Isolate the component of the revaluation other than exchange.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      6. Task 6Journal entries

        Record the revaluation of the land.

        Calculator

        Click in an answer field to be able to insert the result.

        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.

        1. Line 1

        2. Line 2

        TotalsDebit0Credit0

      7. Task 7Professional judgement

        Is the November average rate acceptable? Justify.

      8. Task 8Calculation

        Translate the November sales.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Calculation

        Translate the November sales.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      9. Task 9Calculation

        Translate the advance paid.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Calculation

        Translate the advance paid.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      10. Task 10Journal entries

        Record the advance.

        Calculator

        Click in an answer field to be able to insert the result.

        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.

        1. Line 1

        2. Line 2

        TotalsDebit0Credit0

      11. Task 11Effects on the financial statements

        What is the effect of the entries on the financial statements?

        Part 1 · Classification · Analysis

        State the direction of the effect on each financial statement aggregate.

        1. Financial position (balance sheet)

        2. Profit or loss

        3. Other comprehensive income

        4. Equity

        Calculator

        Click in an answer field to be able to insert the result.

        Part 2 · Calculation · Analysis

        Quantify the effect on the aggregates concerned.

        1. €
        2. €
        3. €

        Checks

        • 0 / 3 steps entered
        • Amounts readable

        Result: Amount of the effect — Equity

      12. Task 12Conclusion

        Write the conclusion.

      Workspace

      Your working draft for this file: points noted, leads, intermediate calculations.

      Saved on this device only; never graded.

      Conclusion

      Submission and solution

      Complete every item of the file to submit it (0 / 14).

      Document this file

      These working papers use the data and results of this case.

      Normative references

      • IAS 21 §22
      • IAS 21 §23
      • IAS 21 §30