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A. The Machine's Final Recorded Value Was P1,558,000
A. The Machine's Final Recorded Value Was P1,558,000
2. In the entry made on December 2nd to revalue foreign currency receivable to current
equivalent peso value,
a. Accounts Payable will be debited for P18,350.
b. Foreign Currency Units will be debited for P18,500.
c. Foreign Currency Transaction Gain will be credited for P150.
d. Other Comprehensive Income will be credited for P300.
3. Based on the preceding information, what is the DEBIT entry (ACCOUNT AND
AMOUNT) required to settle foreign currency payable on December 2?
Debit: A/P 18,650; Credit: FCU 18,650
4. On January 15, a Philippine company purchases merchandise from a foreign supplier for
1,000,000 foreign currency (FC), when the spot rate is P0.15/1 FC On the same date, it
enters a forward contract for delivery of FC 1,000,000 on March 15, at a price of P0.148/FC.
On March 15, when the spot and forward rate for March 15 delivery is P0.156/FC, the
company closes the forward contract and pays for the merchandise. The merchandise has
not yet been sold at March 15. What amount, in pesos, does the company pay for the
merchandise? At what amount, in pesos, does the merchandise appear on the
company’s March 15 balance sheet?
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Amount paid Merchandise balance
a. P148,000 P148,000
b. P148,000 P150,000
c. P156,000 P150,000
d. P150,000 P156,000
5. A Philippine company issues a purchase order for merchandise to a foreign supplier. The
agreed upon total price is 1,200,000 foreign currency units (FCU), and the current spot rate
is P1/FC 1. Suppose the company enters a forward contract when the purchase order is
issued, at a rate of P0.95/FC 1, for delivery when the merchandise is received. If the spot
rate rises to P1.05 when the merchandise is received and paid for, at what value will
the merchandise be reported on the company’s books?
a. P1,020,000 c. P1,200,000
b. P1,140,000 d. P1,260,000
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c. Credit to Foreign Currency Receivable from Exchange Broker, P180,000.
d. Debit to Foreign Currency Units, P184,000.
10. On September 1, 2021, Philippine Company entered into a foreign exchange contract for
speculative purposes by purchasing 50,000 foreign currencies (FCs) for delivery in 60 days.
The rates to exchange pesos for FCs follow:
9/1/21 9/30/21
Spot rates . . . . . . . . . . . . . . P. 75 P0.70
30- day forward rate . . . . 0.73 0.72
90- day forward rate . . . . 0.74 0.73
In its September 30, 2021, income statement, what amount should JS report as
foreign exchange loss (SUPPLY YOUR ANSWER)
The first forward contract was to hedge a purchase of inventory on September 1, payable on
December 1. On September 30, what amount of foreign currency transaction loss
should Mudd Plating report in income? (SUPPLY YOUR ANSWER)
10,000
12. The second forward contract was strictly for speculation. On September 30, 2021,
what amount of foreign currency transaction gain should Mudd Plating report in
income?
(SUPPLY YOUR ANSWER)
2,500
13. On November 1, 2021, National Company sold inventory to a foreign customer. The account
will be settled on March 1 with the receipt of 200,000 foreign currency units (FCU). On
November 1, National also entered into a forward contract to hedge the exposed asset. The
forward rate is P0.80 per unit of foreign currency. National has a December 31 fiscal year-
end. Spot rates on relevant dates were:
Date Per unit of Foreign Currency
November 1 P0.83
December 31 0.81
March 1 0.84
What will be the adjusted balance in the Accounts Receivable account on December
31, and how much gain or loss was recorded as a result of the adjustment?
Receivable Balance Gain/Loss Recorded
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a. P170,000 P4,000 gain
b. P162,000 P4,000 loss
c. P168,000 P2,000 gain
d. P164,000 P2,000 loss
15. The second forward contract was strictly for speculation. On April 30, 2021, what amount of
foreign currency transaction gain should Manatee report in income. (SUPPLY YOUR
ANSWER)
3,000
16. On November 1, 2021, Cone Company sold inventory to a foreign customer. The account
will be settled on March 1 with the receipt of 250,000 foreign currency units (FCU). On
November 1, Cone also entered into a forward contract to hedge the exposed asset. The
forward rate is P0.90 per unit of foreign currency. Cone has a December 31 fiscal year-end.
Spot rates on relevant dates were:
Date Per Unit of Foreign Currency
November 1 P0.93
December 31 0.91
March 1 0.94
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Dollars Receivable, 225,000; Discount on Forward Contract, 7,500; FCU Payable, 232,500
17. Pile, Inc. purchased merchandise for 500,000 FC from a foreign vendor on November 30,
2021. Payment in foreign currency is due January 31, 2022. On the same day, Pile signed
an agreement with a foreign exchange broker to buy 500,000 FC on January 31, 2022.
Exchange rates to purchase 1 FC are as follows:
Nov. 30, 2021 Dec. 31, 2021 Jan. 31, 2022
Spot . . . . . . . . . . . . . . . . . . . . P1.49 P1.45 P1.44
30 day . . . . . . . . . . . . . . . . . . P1.48 P1.43 P1.43
60 day . . . . . . . . . . . . . . . . . . P1.46 P1.41 P1.42
What will be the adjustment to the account payable included in the journal entry
record on November 30, 2021?
a. P20,000 debit c. P30,000 debit
b. P20,000 credit d. P-0-
LONG PROBLEM 1
On January 1, 2020, Original Pilipino Music (OPM), a manufacturer of high-end recording
equipment based in a foreign country, shipped 120,000 FCU (foreign currency units) worth of
inventory to its main foreign distributor, with full payment of these goods to be paid by February
28, 2020. OPM has a January 31 year end. A list of significant dates and exchange rates is
shown below.
18. At what value did OPM record the initial sale to its American distributor? 136,920
19. What is the amount of cash received by OPM on the settlement date? 137,400
20. What is the amount of OPM’s foreign exchange gain or (loss) on February 28th?
120 gain
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LONG PROBLEM 2
Cleared Corp. owns a subsidiary in Singapore whose Statement of Financial Position in
Singapore Dollars for the last two years follow:
Assets
January 1, 2020 S$ 1 = P 45
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Cleared formed the subsidiary on January 1, 2020. Income of the subsidiary was earned evenly
throughout the years and the subsidiary declared dividends worth S$15,000 on September 12,
2020 and none were declared during 2021.
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