Professional Documents
Culture Documents
Foreign Currency Transactions2021 3
Foreign Currency Transactions2021 3
Problem A. A purchase of merchandise from a foreign currency supplier is made on Nov. 10 2021. The
Philippine corporation purchased merchandise from a US firm for USD$15,000. The following rates were
available:
Buying Rate Selling Rate
November 10, 2021 US$1= P46.00 P1=$.021505
December 31, 2021 US$1= P45.80 P1 =$.021277
January 8, 2022 (settlement date) US$1= P46.20 P1=$.022222
How much is the foreign currency accounts payable on Nov. 10, 2021? 697,500
How much is the foreign currency accounts payable on Dec. 31, 2021? 705,000
How much is forex gain or loss on Dec. 31, 2021? 7,500 FOREX LOSS
How much is the payment on the settlement date? 675,000
How much is forex gain or loss on the settlement date? 30,000 FOREX GAIN
Problem B. A selling of merchandise to a foreign customer is made on Nov. 10, 2021. The Philippine
corporation sold merchandise to a US firm for USD$15,000. The following rates were available:
How much is the foreign currency accounts receivable on Nov. 10, 2021? 669,750
How much is the foreign currency accounts receivable on Dec. 31, 2021? 687,000
How much is forex gain or loss on Dec. 31, 2021? 17,250 GAIN
How much is the cash proceeds on the settlement date? 676,500
How much is forex gain or loss on the settlement date? 10,500 LOSS
Problem C. On March 31, 2022, a Philippine company purchases merchandise to a foreign supplier in
Singapore dollar. The merchandise costs SG$12,000. On April 1, 2022, the Philippine company borrowed a
30-day 12% note payable to pay for the merchandise. On April 30, 2022, the Philippine company paid the
note payable.
How much is the foreign currency notes payable on March 31, 2022? 425,640
How much is the interest expense on April 30, 2022? 4,328.40
How much is the cash payment on the settlement date? 437,168.40
How much is forex gain or loss on April 30, 2022? 7,200
Problem D. On March 1, 2022, a Philippine company sells merchandise to a foreign customer in Singapore
dollar. The merchandise costs SG$12,000. On the same date, the Philippine company received a 60-day 12%
note receivable from the foreign customer. On April 30, 2022, the Philippine company collected the total
proceeds from the foreign customer.
How much is the foreign currency note receivable on March 1, 2022? 408,000
How much is the foreign currency note receivable on March 31, 2022? 415,200
How much is interest receivable on March 31, 2022? 4,152
How much is forex gain or loss on March 31, 2022? 7,200
How much is total cash collection from the foreign customer? 428,400
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How much is interest income on April 30, 2022? 4,200
How much is forex gain or loss on April 30, 2022? 4,848
Problem D. On June 1, 2022 A Corp. purchased merchandise worth 500,000 Yen from J Corp. which is
payable on August 1, 2022. To minimize the risk, A Corp. bought 500,000 Yen on June 1, 2022 for deliver on
August 1, 2022. The following exchange rates occurred:
Problem E. On December 1, 2022 A Corp. sold merchandise worth 50,000 Rial from S Corp. which is payable
on December 31, 2022. To minimize the risk, A Corp. sold 50,000 Rial on December 1, 2022 for delivery on
February 1, 2018. The following exchange rates occurred:
Problem F. On October 1, 2021 the entity purchased an equipment from a European company and to be
delivered on February 28, 2022 and the cost is 5,500 euros. To protect from the fluctuation of the euro
currency, the entity purchased a 150-day forward contract for 5,500 euros.
Problem G. On October 1, 2021 the entity secured an order of an merchadise from an Australian company
and to be delivered on February 28, 2022 and the cost is 12,500 AUD. To protect from the fluctuation of the
australian currency, the entity sold 12,500 AUD for delivery in 150 days.
How much is the revenue from the sale of merchandise on October 1, 2021? 0
How much is the forex gain or loss in the hedge item on October 31, 2021? 625 GAIN
How much is the forex gain or loss in the hedging instrument on October 31, 2021? 625 LOSS
How much is the forex gain or loss in the hedge item on November 30, 2021? 250 LOSS
How much is the forex gain or loss in the hedging instrument on November 30, 2021? 250 GAIN
How much is the forex gain or loss in the hedge item on the settlement date? 2,375 LOSS
How much is the forex gain or loss in the hedging instrument on the settlement date? 2,375 GAIN
How much is the revenue from the sale of merchandise on the settlement date? 446,875
SPECULATION
Problem H. The entity entered into a 180-day forward contract to buy 500,000 Yen for speculation
purposes.
Problem I. The entity entered into a 120-day forward contract to sell 55,000 Chinese Yuan for speculation
purposes.
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Problem J. A Philippine company owns a foreign company in London. The following data is given as of
December 31, 2014 measured in pounds.
Additional Information:
There is a credit balance of the cumulative translation adjustment at December 31, 2013 of P50,000
Retained earnings at December 31, 2013 is measured at P119,500 in the Philippine books while in the British
company it is GBP 2,500. When the foreign company was incorporated, the exchange rate is GBP 1= P67.20
Following exchange rates are given:
January 1, 2014: GBP 1= P67.40
December 31, 2014: GBP 1= P67.60
Average for 2014: GBP 1= P67.50
FOREIGN CURRENCY TRANSLATION ADJUSTMENT- OCI CUMULATIVE 51,775 GAIN
FOREIGN CURRENCY TRANSLATION ADJUSTMENT- OCI FOR THE YEAR 1,775 GAIN
Problem K. On October 1, 2014, the company took delivery from a Bahrain firm of invetory costing 850,000
dinar. Payment is due on January 30, 2015. Concurrently the company paid P11,700 to acquire an at-the-
money call option for 850,000 Bahrain dinar. The strike price is P9.40.
How much is the forex gain or loss on the hedging intrument due to change in the ineffective portion on
December 31, 2014 if changes in the time value will be excluded from the assessment of hedge
effectiveness? 8,050 LOSS
How much is the forex gain or loss on the hedging instrument due to the change in the effective portion
on December 31, 2014 if changes in the time value will be excluded from the assessment of hedge
effectiveness? 19,550 GAIN
How much is the forex gain or loss in the hedging activity on December 31, 2014? 8,050 LOSS
How much is the forex gain or loss in the hedging instrument in 2014 if changes in the time value will be
excluded from the assessment of hedge effectiveness? 8,050 LOSS
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PUT OPTION CONTRACTS (FAIR VALUE HEDGE)
Problem L. On December 1, 2014, the company acquired 3,400 shares of AMV Company at a cost of P42 per
share and classifies them as fair value-profit or loss. On the same date the company decides to hedge
againts possible decline in value of securities by purchasing at cost of P7,500 at-the-money put option to sell
3,400 shares. The option will expire on April 1, 2015.
How much is the forex gain or loss on option contract due to the change in time value on December 31,
2014 if split accounting is used in the assessment of hedge effectiveness? 3,200 LOSS
How much is the forex gain or loss on the option contract due to the change in intrinsic value on
December 31, 2014 if split accounting is used in the assessment of hedge effectiveness? 5,100 GAIN
How much is the forex gain or loss in the hedging activity on December 31, 2014? 3,200 LOSS
How much is the forex gain or loss in the option contract in 2014 of non-split accounting is used in the
assessment of hedge effectiveness? 1,900 GAIN
Problem M. On November 1, 2021, Cebu Co. signed an ordinary contract for the delivery of specialized
equipment from US-based manufacturer at a selling price of US$1,000. The equipment was actually
delivered by the supplier to Cebu Co. on December 1, 2021 and Cebu Co. signed a 90-day short-term interest
bearing 12% note payable with due date on March 1, 2022. The note provides that the principal and interest
shall be paid on the maturity date. (Use 360-day). On December 1, 2021, in order to protect itself from
foreign currency risk, Cebu Co. entered into a forward contract with BPI for the purchase of US$1,030 to be
delivered on March 1, 2022. The following direct exchange rates are provided:
Compute for the (1) gain̷ (loss) in hedging activity for the year ended December 31, 2021 and (2) gain ̷
(loss) in hedging activity for the year ended December 31, 2022--- 2,970 LOSS, 2,060 GAIN
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Problem N. On October 1, 2021, Davao Inc. sold on account an inventory to a US-based company at a price
of $5,000 collectible on January 30, 2022. On November 1, 2021, Davao Inc. purchased on account an
inventory to a US-based company at a price of $8,000 payable on March 2, 2022.
On October 1, 2021, in order to hedge the foreign currency risk related to its foreign currency denominated
account receivable, Davao Inc. acquired a 120-day put option from RCBC to sell $5,000 at a strike price of
P40 by paying option premium of P500. On November 1, 2021, in order to hedge the foreign currency risk
related to its foreign currency denominated account payable, Davao Inc. acquired a 120-day call option from
RCBC to buy $8,000 at an option price of P41 by paying option premium of P600.
Compute for the net gain or loss as a result of hedging activity to be reported by Davao Inc. for the years
ended (1) December 31, 2021 and (2) December 31, 2022 ----2,900 NET GAIN, 4,000 LOSS
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