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9/30/2016 1st
Final Quiz
Home / CBSA / REVN01B - Advanced Accounting Review / ADVANCED ACCOUNTING AS PART OF BOARD EXAM SUBJECTS / 1st Final Quiz
Started on Friday, September 30, 2016, 1:02 PM

State Finished
Completed on Friday, September 30, 2016, 3:29 PM
Time taken 2 hours 27 mins
Marks 9.00/28.00
Grade 32.14 out of 100.00
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Question 1
Incorrect Mark 0.00 out of 1.00
CHARLES Corp. entered into a forward contract to hedge a sale of inventory in October 26,
2016 to be collected on January 24, 2017. 72,000 FC (foreign currency) in 90 days. The
relevant exchange rates as follows:
Spot rate Forward rate (1/24
October 26, 2016 P52.73
December 31, 2016 52.82
January 24, 2017 52.94
What is the net forex gain (loss) from this transaction and hedge that will be reported
on CHARLES’s 2016 statement of income?
Answer: (2,160)
The correct answer is: (P2,160)
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9/30/2016 1st Final Quiz
Question 2
On December 1, 2016, Machupapii, Inc. entered into a 120-day forward contract to purchase
250,000 US dollars for speculative purposes. Machupapii, Inc. ᶷ鱍scal year ends on December
31. The exchange rates are as follows:
Date Spot rate Forward rate (3/31/10)
December 1, 2016 P45.00 P45.50
December 31, 2016 46.00
January 30, 2017 45.60
March 31, 2017 45.10 My Courses
How much is the forex gain or loss to be reported from this forward contract in 2017?
Answer: (350,000)
The correct answer is: 350,000
Question 3
On October 2, 2016, Fraser Inc. ordered a custom-built passenger van from a Japanese ᶷ鱍rm.
The purchase order is non-cancellable. The purchase price is 1,000,000 yen with delivery
and payment to be made on March 31, 2017. On October 2, 2016, Fraser, Inc. entered into a
forward contract to buy 1,000,000 yen on March 31, 2017 for P0.57. On March 31, 2017, the
custom-built passenger van was delivered. My Courses

10/2/2016 12/31/2016 3/31/2017
Spot rate (yen) P0.50 P0.56 P0.57
Forward rate P0.53 P0.58 P0.57
The Firm Commitment account balance on March 31, 2017 should be:

Answer: 40,000 liability
The correct answer is: P40,000 liability
Question 4
1. On October 2, 2016, Fraser Inc. ordered a custom-built passenger van from a Japanese

ᶷ鱍rm. The purchase order is non-cancellable. The purchase price is 1,000,000 yen with
delivery and payment to be made on March 31, 2017. On October 2, 2016, Fraser, Inc.
entered into a forward contract to buy 1,000,000 yen on March 31, 2017 for P0.57. On
March 31, 2017, the custom-built passenger van was delivered.
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10/2/2016 12/31/2016 3/31/2017
What is the fair value of the forward contract on December 31, 2016?

Answer: 50,000 receivable
The correct answer is: P50,000 receivable
Question 5
CLETH Corporation issued a promissory note denominated in foreign currency for the
purchase made from an Italian supplier. The following were the related transactions: (in Italy
Lire). On December 1, CLETH Corporation purchased merchandise from an Italian supplier
for 60-day, 18% promissory note for 108,000 Italy lire, at a selling rate of 1FC to P74.20. On
December 31, the selling spot rate is 1FC to P74.85. On January 30, the selling spot rate is
1FC to P75.75.

On the settlement date, how much is the foreign exchange gain/loss?
Answer: (98,658)
The correct answer is: 98,658 loss
Question 6

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10/2/2016 12/31/2016 3/31/2017
The value of the equipment on March 31, 2017 assuming fair value hedge:

Answer: 530,000
The correct answer is: P530,000
Question 7
1. The Italy branch of Manila Company reports the following results of its operations for 2016

(in Euro):

Sales 10,000 EURO
Cost of Sales
Purchases 1,000
Shipments from Manila 5,000
Inventory, End (800) My Courses 5,200
Gross Proᶷ鱍t 4,800
Operating Expenses (1,000)
Net Income 3,800

Relevant exchange rates for EURO for 2016 are:
January 1 P69.20
December 31 69.95
Average rate during the year 69.50
The only shipment from Manila during the year was determined to have a cost to home
ofᶷ鱍ce of P346,500. The ending inventory was identiᶷ鱍ed to have come from shipments
from Manila. What is the translated comprehensive income of the branch in Italy?
Answer: 264,100
Question 8

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10/2/2016 12/31/2016 3/31/2017

1. The value of the equipment on March 31, 2017 assuming cash 붼䶟ow hedge:

Answer: 530,000
Question 9
Correct Mark 1.00 out of 1.00
1. On January 1, 2016 an entity purchased a tract of vacant land that is situated overseas for

Baht 90,000. The entity classiᶷ鱍ed the land as an investment property. The fair value of the
land at December 31, 2016 is Baht 100,000.

The entity’s functional currency is the Php (Peso)
Spot currency exchange rates: My Courses
January 1, 2016: 1 Baht = P 2
Weighted average exchange rate in 20X0: 1 Baht = P2.04
December 31, 2016: 1 Baht = P2.1

What is the carrying amount of the investment property at December 31, 2016 and
what amount/s would be presented in proᶷ鱍t or loss for the year ended December 31,
2016?
Select one:
a.
Carrying amount of investment property = P189,000. Pro᠀ꠄt for the year includes P9,000 foreign exchange
gain.
b.
Carrying amount of investment property = P210,000. Pro᠀ꠄt for the year includes P20,400 increase in the
fair value of investment property and P9,600 foreign exchange gain.
c.
fair value of investment property.
d.
Carrying amount of investment property = P180,000. Pro᠀ꠄt for the year includes no amount in respect of
the investment property.
Your answer is correct.
The correct answer is:

Carrying amount of investment property = P210,000. Proᶷ鱍t for the year includes P30,000 increase in
the fair value of investment property.
Question 10

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10/2/2016 12/31/2016 3/31/2017

The December 31, 2016 proᶷ鱍t and loss statement, net foreign exchange gain or loss
(forward contract and ᶷ鱍rm commitment):
Answer: 0
The correct answer is: 0
Question 11
1. Return Company acquired machinery for $169,200 from a vendor in New York on

December 1, 2016. Payment in US Dollars was due on March 31, 2017. On the same date, to
hedge this foreign currency exposure, Return entered into a futures contract to purchase
$169,200 from a BDO for delivery on March 31, 2017.
Exchange rates for US Dollars on different dates are as follows:
Dec. 1 Dec. 31 Mar. 31
Selling spot rate 41.4 42.3 43.7 My Courses
30-day futures 42.3 41.8 43.2
60-day futures 41.8 42.2 42.6
90-day futures 40.6 42.5 43.4
120-day futures 42.2 42.8 42.9
What amount will affect proᶷ鱍t or loss regarding the hedging instrument on the ᶷ鱍nancial
statement date in 2016?
Answer: (101,520)
The correct answer is: P50,760 gain
Question 12
1. Inᶷ鱍nity Corporation acquired 80 percent of the common stock of an Egyptian company on

January 1, 2016. The goodwill associated with this acquisition was $18,350. Exchange rates
at various dates during 2016 follow:
January 1 E£1 = $0.1835
December 31 E£1 = $0.1850
Average for 2016 E£1 = $0.1840 My Courses
Goodwill suffered an impairment of 20 percent during the year. If the functional
currency is the Egyptian pound, how much goodwill impairment loss should be
reported on Inᶷ鱍nity’s consolidated statement of income for 2016?
Answer: 3,680
The correct answer is: $3,680
Question 13
On June 1, The Company forecasted the purchase of 5,000 units of inventory from foreign vendor. The purchase would

probably occur on September 30 and require payment of 100,000 foreign currency. It is anticipated that the
inventory could be further processed and delivered to customers by early October.

On June 1, the Company purchased a call option to buy 100,000 FC at a strike price of 1 FC = P0.55 during
September. An option premium of P900 was paid. Change in the time value of the option will be excluded from
the assessment of hedge effectiveness.
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June 1, 2016 June 30 (B/S date) September 30, 2016
Spot Rate (market price) 0.53 0.552 0.56
Strike price (exercise price) 0.55 0.55 0.55
Fair value of call option P900 P1,300 P1,000

On September 30, the Company purchased 5,000 units of inventory cost of 103,000 FC. The option was
settled/sold on September 30, 2016 at its fair value of P1,000.

What is the foreign exchange gain or loss on option contract (hedging instrument) on September 30?
Select one:
a.
Equity Earnings
800
1,100
b.
Equity Earnings

1,100 (1,000)
c.
Equity Earnings
(1,100)
800
d.
Equity Earnings

1,000 (1,100)

Equity Earnings

1,000 (1,100)
Question 14
On December 1, 2016, Glenda Company whose functional currency is the Philippine peso
purchased equipment from a German Company invoiced at Euro 100,000 to be settled on
February 18, 2017. The Euro/Peso exchange rates on December 1, 2016, December 31,
2016 and February 28, 2017 were P14.28, P14.31 and P14.41, respectively. Assume Glenda
hedge the equipment purchased by a forward contract on December 1, 2016 forMy theCourses
delivery
of Euro 100,000 on February 28, 2016 at a forward rate of P14.32. Assume further that the
forward rates for a 60-day forward and a 30-day forward at December 31, 2016 is P14.36
and P14.40, respectively, and that the forward contract is a derivative ᶷ鱍nancial instrument
that is net cash-settled upon expiry. Determine the (1) balance sheet presentation of the
forward contract at December 31, 2016 and (2) net cash settlement between counterparties
at February 28, 2017
Answer: 1) 1,436,000 receivable; 1,432,000 payable and 2) 9,000
The correct answer is: (1) P4,000 asset
Question 15
On October 2, 2016, Fraser Inc. ordered a custom-built passenger van from a Japanese ᶷ鱍rm.
The purchase order is non-cancellable. The purchase price is 1,000,000 yen with delivery
and payment to be made on March 31, 2017. On October 2, 2016, Fraser, Inc. entered into a
forward contract to buy 1,000,000 yen on March 31, 2017 for P0.57. On March 31, 2017, the
custom-built passenger van was delivered.
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10/2/2016 12/31/2016 3/31/2017

The December 31, 2016 foreign exchange gain or loss on the hedging instrument (forward
contract) assuming cash 붼䶟ow hedge:
Answer: 50,000
The correct answer is: P50,000 gain – OCI
Question 16
1. An entity purchases plant from a foreign supplier for 3 million euros on January 31, 2016,

when the exchange rate was 2 euros = 1 US dollar. At the entity’s year-end of March 31,
2016, the amount has not been paid. The closing exchange rate was 1.5 euros = 1 US dollar.
The entity’s functional currency is the US dollar. Which of the following statements is
correct?
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Select one:
a.
Cost of plant $2 million, exchange loss $0.5 million, trade payable $1.5 million
b.
Cost of plant $2 million, exchange loss $0.5 million, trade payable $2 million

c.
Cost of plant $1.5 million, exchange loss $0.5 million, trade payable $2 million
d.


Question 17
1. Paris, a wholly-owned subsidiary of Filipino Corp. is located in France. In 2016, Filipino

Corp. borrowed French francs as a partial hedge of its investment in Paris Co. on December
31, 2016, in the preparation of consolidated ᶷ鱍nancial statements, Filipino Corp’s translation
loss on its investment in the subsidiary amounted to P500,000, while its exchange gain on
the borrowing amounted to P300,000.
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What amount of gain or loss should Filipino Corp. report in consolidated balance
sheet?
Answer: (200,000)
The correct answer is: (200,000)
Question 18
On June 15, 2016, Psalm Company purchased merchandise worth 100,000 Swiss francs from
its Swiss supplier payable within 30 days under an open account agreement. Psalm issued
a 30-day 6% note payable in Swiss francs. On July 15, 2016, Psalm paid the note in full. The
following spot rates (P/SF) are provided:
Buying
June 15, 2016 P24.03
July 15, 2016 24.15
How much is the loss on the payment to the Swiss supplier did Psalm recognize?
Answer: (7,035)
Question 19
On November 15, 2016, Celt Inc., a Philippine Company, ordered merchandise FOB shipping
point from Japanese Company for 200,000 yens. The merchandise was shipped and
invoiced to Celt on December 10, 2016. Celt paid the invoice on January 10, 2017. The spot
rates for yens on the respective dates are as follows:
November 15, 2016 P.4955
December 10, 2016 .4875 My Courses
December 31, 2016 .4675
January 10, 2017 .4475

In Celt’s December 31, 2016 income statement, the foreign exchange gain is:
Answer: 4,000
Question 20
On June 18, Trisha Corporation entered into a ᶷ鱍rm commitment to purchase specialized
equipment from the Shaza Trading Company for Y80,000,000 on August 20. The exchange
rate on June 18 is Y100=P1. To reduce the exchange rate risk that could increase the cost
of the equipment in pesos, Trisha pays P12,000 for a call option contract. This contract
gives Trisha the option to purchase Y80,000,000 at an exchange rate of Y100=P1 on August
20. On August 20, the exchange rate if Y93=P1.

How much did Trisha save by purchasing the call option?
Answer: 48,215
Question 21
1. Inᶷ鱍nity Corporation acquired 80 percent of the common stock of an Egyptian company on

January 1, 2016. The goodwill associated with this acquisition was $18,350. Exchange rates
at various dates during 2016 follow:
January 1 E£1 = $0.1835
December 31 E£1 = $0.1850
Average for 2016 E£1 = $0.1840 My Courses
Goodwill suffered an impairment of 20 percent during the year. If the functional
currency is the Egyptian pound, how much goodwill impairment loss should be
reported on Inᶷ鱍nity’s consolidated statement of income for 2016?
Answer: 3,680
The correct answer is: $3,680
Question 22
1. On January 1, 2016 an entity purchased a tract of vacant land that is situated overseas for

Baht 90,000. The entity classiᶷ鱍ed the land as an investment property. The fair value of the
land at December 31, 2016 is Baht 100,000.

The entity’s functional currency is the Php (Peso)
Spot currency exchange rates: My Courses
January 1, 2016: 1 Baht = P 2
Weighted average exchange rate in 20X0: 1 Baht = P2.04
December 31, 2016: 1 Baht = P2.1

1. Assuming the entity cannot, without undue cost or effort, determine the fair value of its

investment property reliably on an ongoing basis. What is the carrying amount of the
investment property at December 31, 2016 and what amount/s would be presented in proᶷ鱍t
or loss for the year ended December 31, 2016?
Select one:
a.
fair value of investment property.
b.
Carrying amount of investment property = P180,000. Pro᠀ꠄt for the year includes no amount in respect of
the investment property.
c.
fair value of investment property and P9,600 foreign exchange gain.
Your answer is incorrect.

Carrying amount of investment property = P180,000. Proᶷ鱍t for the year includes no amount in respect
of the investment property.
Question 23
1. A U.S. Company’s foreign subsidiary had the following amounts in stickles (§) in 2016:

Cost of goods sold 6,000,000

Ending inventory 300,000
Beginning inventory 120,000
The average exchange rate during 2016 was §1 = $.96. The beginning inventory was
acquired when the exchange rate was §1 = $1.20. The ending inventory was acquired
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when the exchange rate was §1 = $.90. The exchange rate at December 31, 2016 was
§1 = $.84. Assuming that the foreign country had a hyper-in붼䶟ationary economy, at what
amount should the foreign subsidiary’s cost of goods sold have been re붼䶟ected in the
2016 U.S. dollar income statement?
Answer: 5,760,000
The correct answer is: 5,040,000
Question 24
1. Catherine Corp sold handicrafts goods to a US ᶷ鱍rm for $100,000 in 2016. Pertinent

information on exchange rate follows:

Buying Selling
Sep 4 Receipts of order 45.80 46.00
Oct 15 Date of Shipment 47.00 48.00
Dec 13 Date of Balance sheet 47.20 48.50
Jan 6, 2017 Date of settlement 46.00 47.00
The sale would appropriately recorded at:
Answer: 4,700,000
The correct answer is: 4,700,000
Question 25
1. Paris, a wholly-owned subsidiary of Filipino Corp. is located in France. In 2016, Filipino

Corp. borrowed French francs as a partial hedge of its investment in Paris Co. on December
31, 2016, in the preparation of consolidated ᶷ鱍nancial statements, Filipino Corp’s translation
loss on its investment in the subsidiary amounted to P500,000, while its exchange gain on
the borrowing amounted to P300,000.
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What amount of gain or loss should Filipino Corp. report in consolidated income
statement?
Answer: 0
The correct answer is: 0
Question 26
1. A foreign subsidiary of Cream Corporation has certain balance sheet accounts on

December 31, 2016. Information relating to these accounts in Philippine peso as follows:
Current rates Historical rates
Marketable debt securities P65,000 P75,000
Inventories 500,000
Patents 80,000 85,000
Totals 645,000
What total amount should be included in Cream’s December 31, 2016 consolidated
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balance sheet for the above accounts if subsidiary’s foreign operations operates
independently in economic and ᶷ鱍nancial matters (pr not integral to the operations of
the parent company):
Answer: 645,000
Question 27
Beth has the following foreign currency transactions during 2016: Purchased merchandise
from a foreign supplier on January 20, 2016 for the Philippine peso equivalent of P60,000
and paid the invoice on April 20, 2016 at the Philippine peso equivalent of P68,000. On
September 1, 2016, borrowed the Philippine peso equivalent of P300,000 evidenced by a

note that is payable in the lender’s local currency on September 1, 2017. On December 31,
2016, the Philippine peso equivalent of the principal amount was P320,000.
In Beth’s 2016 income statement, what amount should be included as a foreign
exchange loss?
Answer: 28,000
Question 28
1. On Nov. 1, 2016, Cars took delivery from US ᶷ鱍rm of inventory costing US 100,000. Payment

is due on January 30, 2017. Concurrently, Cars paid P900 cash to acquire a 90 day call
option for US 100,000.
Nov. 1, 2016 Dec. 31, 2016 Jan. 30, 2017
Spot rate 1.2 1.22 1.23
Strike price 1.2 ? ?
FV of call option ? 2,200 ?
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What is the net FOREX gain (loss) to be recognized by Cars on Dec. 31, 2016 should be:
Answer: (700)
The correct answer is: 700 net loss
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9/30/2016 1st

Started on Friday, September 30, 2016, 1:02 PM

The correct answer is: (P2,160)

The correct answer is: 350,000

Answer: 40,000 liability

The correct answer is: P40,000 liability

Answer: 50,000 receivable

The correct answer is: P50,000 receivable

The correct answer is: 98,658 loss

The correct answer is: P530,000

The correct answer is: P264,100

The correct answer is: P570,000

Your answer is correct.

The correct answer is:

The correct answer is: 0

The correct answer is: P50,760 gain

1. Inᶷ鱍nity Corporation acquired 80 percent of the common stock of an Egyptian company on

The correct answer is: $3,680

Your answer is correct.

The correct answer is:

Answer: 1) 1,436,000 receivable; 1,432,000 payable and 2) 9,000

The correct answer is: (1) P4,000 asset

The correct answer is: P50,000 gain – OCI

Your answer is correct.

The correct answer is:

1. Paris, a wholly-owned subsidiary of Filipino Corp. is located in France. In 2016, Filipino

The correct answer is: (200,000)

The correct answer is: 7,000

The correct answer is: P4,000

The correct answer is: 48,215

1. Inᶷ鱍nity Corporation acquired 80 percent of the common stock of an Egyptian company on

The correct answer is: $3,680

Your answer is incorrect.

The correct answer is:

Cost of goods sold 6,000,000

The correct answer is: 5,040,000

information on exchange rate follows:

The correct answer is: 4,700,000

1. Paris, a wholly-owned subsidiary of Filipino Corp. is located in France. In 2016, Filipino

The correct answer is: 0

1. A foreign subsidiary of Cream Corporation has certain balance sheet accounts on

The correct answer is: P645,000

September 1, 2016, borrowed the Philippine peso equivalent of P300,000 evidenced by a

The correct answer is: 28,000

The correct answer is: 700 net loss

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