Problem 1:

On November 12, 2020, Sisig Company, a Philippine based company, received a purchase order
amounting to 135,000 yen from Sushi Company, a Japanese based company, to be shipped under the term
FOB shipping point. The merchandise was shipped on December 1, 2020 and received by Sushi on
December 12, 2020. Full payment was due on January 10, 2021. The spot rates for Japanese yen were as
follows:
November 12, 2020 P0.375
December 1, 2020 0.390
December 12, 2020 0.385
December 31, 2020 0.365
January 10, 2021 0.363

1. How much should Sisig report as sales for 2020?

2. How much is the foreign exchange gain or loss to be reported in the 2020 statement of profit
or loss of Sisig?
3. How much is the foreign exchange gain or loss to be reported in the 2020 statement of profit

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or loss of Sushi?

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4. How much should Sisig report as Receivable from Sushi as of December 31, 2020?

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5. How much is the foreign exchange gain or loss to be reported in the 2021 statement of profit

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or loss of Sisig?

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Problem 2:
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On October 21, 2020, Mass Company sent a purchase order for goods to be purchased on account from a
British firm for 65,500 pounds. The date of invoice is November 21, 2020 and is due on January 26, 2021.
Relevant exchange rates are as follows:
OFFER rate BID rate
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October 21, 2020 P57.50 P55.20

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November 21, 2020 58.70 56.80

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December 31, 2020 54.15 53.40

January 26, 2021 52.35 50.50

1. How much is the foreign exchange gain or loss in 2020?

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2. How much is the net foreign exchange gain or loss related to the importation transaction?
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3. How much is the foreign exchange gain or loss to be reported by the British Firm in relation
to the above transaction?
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Problem 3:
Passport Company, a Philippine firm, entered into an import transaction with a Chinese firm for a
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transaction price of 30,000 Yuan. The following relevant exchange rates are as follows:
Date of purchase PHP1:0.10 Yuan
End of reporting period PHP1:0.125 Yuan
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How much is the foreign exchange gain (loss) to be reported in the above transaction?

Problem 4:
On December 1, 2020, Archipelago Company, a Philippine firm, entered into a 120-day forward contract
to buy 150,000 US dollars for speculative purposes. The exchange rates are as follows:
Spot Rate Forward Rate

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 December 1, 2020 P45.00 P45.50
December 31, 2020 46.10 46.50
March 30, 2021 45.10

1. How much is the foreign exchange gain or loss from the forward contract to be reported in
2020?
2. How much is the Peso Payable on December 31, 2020 to be reported in the statement of
financial position?
3. How much is the Foreign Currency Receivable as of December 31, 2020 to be reported in
the statement of financial position?
4. How much is the Derivative Asset (Liability) as of December 31, 2020?
5. How much is the foreign exchange gain or loss from the forward contract to be reported in
2021?

PROBLEM 5:
Safeguard Company sold merchandise for 115,000 Euros to a customer in Europe on November 1, 2020.

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Collection of the account was due on January 31, 2021. On the date of sale, Safeguard entered into a
forward contract to sell 115,000 Euros to UCPB for delivery on January 30, 2021 in order to hedge the

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foreign currency exposure. Exchange rates for Euros are as follows:
November 1 December 31 January 30

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Spot rate P51.90 P50.70 P50.10
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30-day forward rate 52.30 50.40 53.90
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60-day forward rate 51.80 50.30 52.60
90-day forward rate 50.60 51.60 53.40
120-day forward rate 50.10 51.40 52.80
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1. How much is the gain (loss) related to the hedged item for 2020?
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2. How much is the gain (loss) related to the hedging instrument for 2020?
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3. How much is the net gain (loss) related to the hedging activity for 2020?
4. How much is the net gain (loss) to be recognized on settlement date?
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PROBLEM 6:
ABC Inc. is operating within US territory wherein the functional currency US $. However, the
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presentation currency is Philippine Peso. The following financial position data for the year 2020 are
provided:
Total assets on 12/31/2020 $1,000
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Total liabilities on 12/31/2020 200

Ordinary shares on 12/31/2020 300
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Share premium on 12/31/2020 100

Retained earnings on 1/1/2020 200
Net income for year 2020 300
Dividends declared on 12/1/2020 100
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The following additional data are provided:

 All ordinary shares are issued on January 1, 2015
 The translated amount of retained earnings at Philippine Peso on December 31, 2019 is P8,000.
 The following direct exchange rates are determined:
1/1/2015 P45

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 12/31/2019 42
12/1/2020 41
12/31/2020 43
Average rate for 2020 44

1. How much is the translation adjustment under other comprehensive income as of December 31,
2020?
2. How much is the translation adjustment under other comprehensive income to be reported for
the period 2020?

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