Professional Documents
Culture Documents
Problem I
1.
Philippine Viewpoint:
1 $ = P40; 1 Peso = $0.025 ($1/P40)
1 Singapore dollar = P32.00; 1 Peso = 0.03125 Singapore (1 Singapore
Dollar/P32)
Peso
2.
FCU
P8,000
=
P40.00
= $200; or
Problem II
a. Exchange rates:
Arrival Date
1 Singapore dollar = P33.00
Direct
Exchange Rate
Indirect
Exchange Rate
Departure Date
1 Singapore Dollar =
P32.50
(P3,250 / 100 Singapore
dollars)
2.
The direct exchange rate has decreased. This means that the peso has
strengthened during Mr. Alt's visit. For example, upon arrival, Mr. Alt had to pay
P33 per each dollar. Upon departure, however, each dollar is worth just P32.50.
This means that the relative value of the peso has increased or, alternatively, the
value of the dollar has decreased.
3.
The Philippine peso equivalent values for the 100 Singapore dollars are:
Arrival date
100 dollars x P33.00 =
P3,3
00
Departure date
100 dollars x P32.50 =
3,25
0
P
50
Mr. Alt held dollars for a time in which the dollars was weakening against the
peso. Thus, Mr. Alt experienced a loss by holding the weaker currency.
Problem III
1. If the direct exchange rate increases, the peso weakens relative to the foreign
currency unit. If the indirect exchange rate increases, the peso strengthens
relative to the foreign currency unit.
2.
Transaction
Importing
Importing
Exporting
Exporting
Settlement
Currency
Peso
LCU
Peso
LCU
Decreases
Decreases
NA
L
NA
G
NA
G
NA
L
NA
G
NA
L
NA
L
NA
G
Problem IV
1.
December 1, 20x4 (Transaction date):
Purchases..
Accounts payable ($24,000 x P40.55)
973,200
973,200
6,000
6,000
P979,200
973,200
P 6,000
2.
979,200
3,600
975,600
a.
a.1. None transaction date (December 1, 20x4)
a.2. P6,000 loss
a.3. P3,600 gain (March 1, 20x5)
b.
b.1. P979,200 spot rate on the balance sheet date or current rate on the balance
sheet
b.2. P973,200 spot rate on the transaction date or historical rate on the balance sheet
date.
Problem V
1. December 1, 20x4 (Transaction date):
Accounts receivable ($60,000 x P40.00)
Sales
2,400,000
2,400,000
42,000
42,000
P2,442,000
2,400,000
P
42,000
2,436,000
6,000
2,442,000
2.
a.
b.
b.1. P2,442,000 spot rate on the balance sheet date or current rate on the balance
sheet
b.2. P973,200 spot rate on the transaction date or historical rate on the balance sheet
date.
Problem VI
The entries to record these transactions and the effects of changes in exchange rates
are as follows:
November 1, 20x4 (Transaction date):
Equity investment (FVTPL)/Financial Asset
Cash
3,840,000
3,840,000
636,000
636,000
1,020,000
1,020,000
P4,860,0
00
3,840,0
00
P1,020,0
00
P3,840,000
3,888,000
48,00
0
P
972,000
19,200
19,200
5,107,200
5,088,000
P
19,200
5,107,200
57,600
5,164,800
June 20
July 1
August 10
8,400
Accounts Payable
Cash
Settle payable.
8,400
Accounts Receivable
Sales
Foreign sale denominated in pesos
10,000
Cash
Accounts Receivable
10,000
8,400
8,400
10,000
10,000
Collect receivable.
2.
May 1
June 20
July 1
August 10
8,400
600
9,000
10,000
1,000
11,000
8,400
600
9,000
10,000
1,000
11,000
Problem VIII
1. Denominated in FC
RR Imports reports in Philippine pesos:
12/1/x4
12/31/x4
1/15/x5
Transaction
Balance Sheet
Settlement
Direct
Exchange
Rate
2.
Date
Date
Date
P.70
P.66
P.68
December 1, 20x4
Inventory (or Purchases)
Accounts Payable (FC)
P10,500 = FC 15,000 x P.70
10,500
10,500
600
600
300
300
AJE 12/31/x4
10,200
10,200
12/1/x4
10,500
Bal 12/31/x4
AJE 1/15/x5
Bal 1/15/ x5
9,900
300
10,200
10,200
Bal 1/16/x5
Problem IX
1. December 31, 20x6
Accounts Receivable (FC1)
Foreign Currency Transaction Gain
Adjust receivable denominated in FC1
to current peso equivalent
and recognize exchange gain:
P83,600 = FC475,000 x P.176 Dec. 31 spot rate
- 73,600 = Preadjusted Dec. 31, 20x6, value
P10,000
Accounts Payable (FC2)
Foreign Currency Transaction Gain
Adjust payable denominated in foreign
-0-
10,000
10,000
5,200
5,200
3.
164,000
85,500
85,500
164,000
4.
5.
5.
6,300
86,000
163,800
163,800
86,000
P10,000
1,900
P11,900
gain
gain
gain
P 5,200
6,300
P11,500
gain
gain
gain
1,900
P11,900
11,500
P23,400
CDL could have hedged its exposed position. The exposed positions are only
those denominated in foreign currency units. The accounts receivable
denominated in FC1 could be hedged by selling FC1 in the forward market,
thereby locking in the value of the FC1. The accounts payable denominated in
FC2 could be hedged by buying FC2 in the forward market, thereby locking in
the value of the FC2.
Problem X
Accounts
Receivable
Accounts
Payable
Foreign Currency
Transaction
Exchange Loss
Foreign Currency
Transaction
Exchange Gain
Case 1
NA
P16,000(a)
NA
P2,000(b)
Case 2
P38,000(c)
NA
NA
P2,000(d)
Case 3
NA
P27,000(e)
P3,000(f)
NA
Case 4
P6,250(g)
NA
P1,250(h)
NA
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
LCU
LCU
LCU
LCU
LCU
LCU
LCU
LCU
40,000 x P.40
40,000 x (P.40 - P.45)
20,000 x P1.90
20,000 x (P1.90 - P1.80)
30,000 x P.90
30,000 x (P.90 - P.80)
2,500,000 x P.0025
2,500,000 x (P.0025 - P.003)
2.
P.4895
P.4845
3.
4
.
FC30,000
FC30,000
Gain
20x4
P14,685
14,535
P
150
P.4845
P.4945
x
x
January 15
Foreign Currency Units (LCU)
Exchange Loss
Accounts Receivable (LCU)
Collect foreign currency receivable and
recognize foreign currency transaction
loss for changes in exchange rates:
P300,000 = (LCU 900,000 / LCU 3) Jan. 15 value
- 315,000 = Dec. 31 Peso equivalent
P 15,000 Foreign currency transaction loss
FC30,000
FC30,000
Loss
20x5
P14,535
14,835
P (300)
300,000
15,000
315,000
P120,000
P140,000
P(35,000)
P280,000
-240,000
P 40,000
-105,000
5
.
x
x
6. c P4,000
AJE
97,500
93,500
4,000
4,000
1/20/x4
AJE
3/20/x4
Foreign Exchange Loss
Accounts Payable (FCU)
90,000
6,000
96,000
6,000
6,000
Notes Payable (FCU)
7/01/x4
AJE
12/31/x4
20,000
Interest expense
Interest Payable (FCU)
500,000
20,000
520,000
20,000
25,000
1,000
26,000
25,000
1,000
1,000
8. c P5,000
10/15/x4
AJE
11/16/x4
105,000
Settlement
11/16/x4
105,000
5,000
5,000
Note: The receivable is recorded on October 15, 20x4, when the goods were
shipped, not on September 1, 20x4, when the order was received.
9. b P1,000
Accounts Payable (FCU)
x4 AJE
500
X5 AJE
1,000
Settlement
4,500
(10,000 x P.60)
4/08/x4
6,000
(10,000 x P.55)
12/31/x4
5,500
(10,000 x P.45)
3/01/x5
4,500
Bal.
1,000
-0-
1,000
10
.
11. b
Cash collected (spot rate date of settlement): 900,000 LCU x P.3333 = P300,000
12. d
20x4: (P.5395 P.5445) loss x 70,000 FCU = P350 loss
20x5: (P.5445 - .P5495) loss x 70,000 FCU = P350 loss
13. c
Date of transaction (7/7)
Balance sheet date (8/31)
Foreign exchange currency gain per FCU
Multiplied by: No. of FCU
2.08
2.05
P
.03
350,000
P 10,500
14. b
Date of transaction (7/3)
Balance sheet date (8/31)
Foreign exchange currency gain per FCU
Multiplied by: No. of FCU
1.58
1.55
P
.03
375,000
P 11,250
15. b The value of the asset acquired should be the spot rate on the date of transaction,
i.e. P-80. Therefore, the final recorded value of the electric generator should be
P40,000 (P.80 x 50,000 FCs)
16. a
Date of transaction
Date of settlement
Foreign exchange currency gain per FCU
Multiplied by: No. of FCU
Foreign exchange currency gain
.75
.80
P
.05
200,000
P 10,000
17. d
Date of transaction (12/15)
Balance sheet date (12/31)
Foreign exchange currency gain per FCU
Multiplied by: No. of FCU
Foreign exchange currency gain
.60
.65
P
.05
80,000
P 4,000
18. b
Date of transaction (11/30)
Balance sheet date (12/31)
Foreign exchange currency gain per FCU
Multiplied by: No. of FCU
Foreign exchange currency gain
1 .65
1.62
P
.03
300,000
P 9,000
19. b
Date of transaction (11/30)
Balance sheet date (12/31)
Foreign exchange currency gain per FCU
Multiplied by: No. of FCU
1.49
1.45
P
.04
500,000
P 20,000
20. a
Date of arrival (P1,000 / 480,000 FC)
Date of departure (P100/50,000 FC)
Foreign exchange currency loss per FCU
Multiplied by: No. of FCU
Foreign exchange currency loss
P .00208
.
00200
P .00008
50,000
P
4
21. b
Date of transaction (10/1)
Balance sheet date (12/31)
Foreign exchange currency gain per LCU
Multiplied by: No. of LCU
Foreign exchange currency gain
1.20
1.10
P
.10
5,000
P
500
22. d
Date of transaction (11/2)
Balance sheet date (12/31)
Foreign exchange currency gain per LCU
Multiplied by: No. of LCU
Foreign exchange currency gain
1. 08
1.10
P
.02
23,000
P
460
23. a
Date of transaction (9/3) : P17,000 / P.85 = 20,000 FC
Date of settlement (10/10)
Foreign exchange currency loss per FC
Multiplied by: No. of FC
Foreign exchange currency loss
. 85
.90
P
.05
20,000
P 1,000
24. b
Date of transaction (3/1) : P31,000 / P.31 = 100,000 FC
Date of settlement (5/10)
Foreign exchange currency gain per FC
Multiplied by: No. of FC
Foreign exchange currency gain
. 31
.34
P
.03
100,000
P 3,000
25. a
Date of transaction (12/5)
Balance sheet date (12/31)
Foreign exchange currency gain per FC
Multiplied by: No. of FC
Foreign exchange currency gain
.265
.262
P
.003
100,000
P
300
26. d
Balance sheet date (12/31)
Date of settlement (1/10)
Foreign exchange currency loss per FC
Multiplied by: No. of FC
Foreign exchange currency loss
.262
.264
P
.002
100,000
P
200
27. c
Foreign exchange currency gain (No. 25)
Foreign exchange currency loss (No. 26)
Overall gain , net
P
_
P
300
200
100
or,
Date of transaction (12/5)
Date of settlement (1/10)
Foreign exchange currency gain per FC
Multiplied by: No. of FC
Foreign exchange currency gain
.265
.264
P
.001
100,000
P
100
28. c
9/5: Original forward rate or 90-day forward rate
12/2: Date of expiration of the contract (assumed) since
the
term spot rate was used
Foreign exchange currency gain per FC
Multiplied by: No. of FC
Foreign exchange currency gain
.1850
.1865
.0015
100,000
P
150
It should be noted that since, the forward contract was not designated as a hedge, offsetting of gain or loss
on the hedged item and hedging instrument is not allowed. Therefore, the foreign exchange gain due to
revaluation of receivable from foreign currency receivable arising from forward contract will be reported
separately, instead of being netted against the exchanges loss of P300 [(P.1865 P.1835) x 100,000 FCs.]
29. c the question is related to purchase transaction or exposed liability, therefore the
payment of the liability is equivalent to the spot rate on the date of settlement.
30. b
20x4
Date of transaction (12/1/20x4)
Balance sheet date (12/31/20x4)
Foreign exchange currency loss per FC
Multiplied by: No. of FC
Foreign exchange currency loss
.0095
.
0096
P
.
0001
1,000,000
P
100
20x5
Balance sheet date (12/31/20x4)
Date of settlement (1/10/20x5)
Foreign exchange currency gain per FC
Multiplied by: No. of FC
Foreign exchange currency gain
.0096
.0094
P
.0002
1,000,000
P
200
31. c
Balance sheet date (12/31/20x4)
Date of settlement (7/1/20x5)
Foreign exchange currency loss
P125,000
140,000
P 15,000
P
P
.940
.930
.010
100,000
P 1,000
It should be noted that since, the forward contract was not designated as a hedge, offsetting of gain or loss
on the hedged item and hedging instrument is not allowed. Therefore, the foreign exchange gain due to
revaluation of payable to foreign exchange dealer arising from forward contract will be reported separately,
instead of being netted against the exchanges loss of P1,500 [(P.945 P.93) x 100,000 FCs.]
34. c
It was assumed that the forward contract was designated as a hedging instrument.
Hedged Item: Exposed Asset (Receivable)
1/1: Date of transaction spot rate
12/31: Balance sheet date
Foreign exchange currency loss per FC
Multiplied by: No. of FC
Foreign exchange currency loss
.945
.930
P
.015
100,000
P
1,500
P 1,500
.940
.930
P
.010
100,000
P 1,000
P
1,000
500
35. d
It was stated in the requirement that the forward contract will not be used, therefore,
only the loss on hedged item will be recognized.
Hedged Item: Exposed Asset (Receivable)
1/1: Date of transaction spot rate
12/31: Balance sheet date
Foreign exchange currency loss per FC
Multiplied by: No. of FC
Foreign exchange currency loss
.945
.930
P
.015
100,000
P
1,500
36. d
Date of transaction (4/8) : P1 / .65 FC (direct quote)
Date of settlement (5/8): P1/ .70 FC (direct quote)
Foreign exchange currency loss per FC
Multiplied by: No. of FC
Foreign exchange currency loss
1.54
1.43
P
.11
35,000
P 3,850
37. d the amount of sales should be the spot rate on the date of transaction (or the
balance sheet date - historical rate). I.e., P1.7241 x 10,000 FCs = P17,241.
38. e
1/1: Date of transaction spot rate
12/31: Balance sheet date
Foreign exchange currency gain per FC
Multiplied by: No. of FC
Foreign exchange currency gain
39. b
P 1.7241
1.818
2
P
.0941
10,000
P
941
P
P
P
1.8182
1.6666
.1516
10,000
1,516
40. a since accounts payable is an exposed account meaning their value will fluctuate
based on the spot exchange rates, the value of the accounts payable should be the
value on May 8, i.e., the spot rate of P1.25 (P.15 x 2,000,000 FCs = P2,500,000).
41. c
5/8: Date of transaction spot rate
5/31: Balance sheet date
Foreign exchange currency loss per FC
1.25
1.26
P
0.01
2,000,00
0
P
20,000
P8,000
6,900
P 1,100
44. d
4/8/20x3: Date of transaction
12/31/20x3: Balance sheet date
Foreign exchange currency loss
P 97,000
103,000
P 6,000
P103,000
105,000
P 2,000
45. d
Theories
1 False
.
2 False
.
3 True
.
4 False
.
5 True
.
6.
True
7.
False
8.
True
9.
False
10
,
True
11
.
12
.
13
.
14
.
15
.
Tru
e
D
C
C
B
16
.
17
.
18
.
19
.
20
.
d
d
c
b
a
21
.
22
.
23
.
24
.
25
.
26.
27.
28.
29.
30.
31
.
32
.
33
.
34
.
35
.
36
37.
38.
39.