Foreign currency items file: initial recognition, closing, exchange differences, advances and estimated rate

Context

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.

Assignment

Foreign currency items file

Purpose of the workpaper

For each item (one instance per item or situation), state its nature, the foreign currency amount and the rates given by the case, check the treatment according to whether the item is monetary or non-monetary, let the file compute the translated amounts and differences, document the judgements (average rate, exchangeability), prepare the entries and their effect on the financial statements.

Questions of the file covered by this workpaper

• Translate the purchase at the spot rate of 15 November 20X5.
• Record the purchase.
• Translate the payable at the closing rate.
• Compute the exchange difference at closing.
• Record the exchange difference at closing.
• Translate the settlement at the rate of the settlement date.
• Compute the exchange difference on settlement.
• Record the settlement.

• ScheduleEntity profileOpen
• InvoiceInvoice from the US supplierOpen
• ScheduleClosing and settlement ratesOpen
• MemoInsurance premiumOpen