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Explain the terms functional currency

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Question 1: Explain the terms 'functional currency' and presentational currency' as it applies to financial reporting and in accordance with the relevant accounting standard.

EuroDollar Plc prepares financial statements to 31 December each year and has the Euros as its functional currency. On 25 October 2018, the company buys inventory for $ 11,000.

Assume the following exchange rates:

25 Oct 2018 Euro 1 = $1.10

28 Nov 2018 Euro 1 = $1.15

31 Dec 2018 Euro 1 = $1.25

Required:

Question 2: Show the journal entries necessary to record this transaction as at 25 October 2018.

Question 3: Show the accounting treatment for the above transaction if:

  1. A payment of $11,000 is made on 28 November 2018
  2. The amount owed remains outstanding at 31 December 2018

Reference no: EM132532909

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