Foreign currency items file: initial recognition, closing, exchange differences, advances and estimated rate: Machine bought in dollars

Context

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.

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 cost of the machine.
• Record the acquisition of the machine.
• Translate the fair value of the land.
• Isolate the component of the revaluation other than exchange.
• Record the revaluation of the land.
• Is the November average rate acceptable? Justify.
• Translate the November sales.
• Translate the advance paid.
• Record the advance.

• ContractPurchase contract of the machineOpen
• ScheduleValuation report on the landOpen
• ScheduleNovember sales journalOpen
• ContractEquipment purchase contract and advanceOpen
• MemoOffice rentOpen