If one Canadian dollar can be exchanged for 90 cents of Philippine peso, what fraction should be used to compute the

indirect
quotation of the exchange rate expressed in Canadian dollars?
Detroit based Auto Corporation, purchased ancillaries from a foreign firm on December 1, 20x4, for 1,000,000 foreign
currencies (FC), when the spot rate for 1 FC was P.0095. On December 31, 20x4, the spot rate stood at P.0096. On
January 10, 20x5 Auto paid 1,000,000 FCs acquired at a rate of P.0094. Autos Income Statements should report a
foreign exchange gain or loss for the years ended December 31, 20x4 and 20x5:
On November 1 20x4, Denver Company borrowed 500,000 local currency units (LCU) from a foreign lender evidenced by an interest
bearing note due on November 1, 20x5, which is denominated in the currency of the lender. The Peso equivalent of the principal was
as follows:
7/1/x4 (date borrowed)
P100,000
12/31/x4 (year-end)
P125,000
7/1/x5 (date repaid)
P140,000
In its income statement for 20x5, what amount should Denver include as foreign exchange gain or loss on the note principal?
MM Companys receivable from a foreign customer is denominated in the customers local currency. This receivable of
900,000 local currency units (LCU) has been translated into P315,000 on MMs December 31,20x4 balance sheet. On
January 15, 20x5, the receivable was collected in full when the exchange rate was 3 LPU to P1. The journal entry MM
should make to record the collection of this receivable is:
Wilshire acquired inventory from foreign corporation. The inventory costs 10,000 FCUs and payment is required immediately. At the
date of the transaction, the exchange rate is 1 FCU = P.92. Which of the following would be included in the journal entry to record the
purchase?
Apex acquired materials from Foghorn Corporation of Mexico. The inventory costs 310,000 FCUs and payment is
required immediately. At the date of transaction, the exchange rate is 1FCU = P.11. Which of the following would be
included in the journal entry to record the purchase?
On July 1, 20x4, BB Company lent P120,000 to a foreign supplier, evidenced by an interest-bearing note due on July 1, 20x5. The note
is denominated in the borrowers currency and was equivalent to 840,000 local currency units on the loan date. The note principal
was appropriately included at P140,000 in the receivables section of BBs December 31, 20x4 balance sheet. The not principal was
repaid to BB on the July 1, 20x5 due date when the exchange rate was 8 LCU toP1. In its income statement for the year ended
December 31, 20x5, what amount should BB include as a foreign currency transaction gain or loss on the note principal?
SS Corporation had the following foreign currency transaction during 20x4. First it purchased merchandise from a
foreign supplier on January 24, 20x4 for the Philippine Peso equivalent of P90,000. The invoice was paid on March 20,
20x4, at the Philippine peso equivalent of P96,000. Second, On July 1, 20x4, SS borrowed the Philippine Peso
equivalent of P500,000 evidence by a note that was payable in the lenders local currency on July 1 20x5. On
December 31, 20x4, The Philippine Peso equivalents of the principal amount and accrued interest were P520,000 and
P26,000, respectively. Interest on the Note is 10 percent per annum. In SSs 20x4 income statement. What amount
should be included as a foreign exchange loss?
On Sep 1 20x4, CC Corporation received an order for equipment from a foreigner customer for 300,000 LCU when the Phil Peso
equivalent was P96,000. CC shipped the equipment on Oct 15, 20x4, and billed the customer for 300,000 LCU when the Phil Peso
equivalent was P100,000. CC received the customers remittance in full on November 16, 20x4 and sold the 300,000 LCU for
P105,000. In its income statement for the year ended Dec 31, 20x4, CC should report foreign exchange gain of :
On April 8, 20x4, TT Corporation purchased merchandise from an unaffiliated foreign company for 10,000 units of the
foreign companys local currency. TT paid the bill in full on March 1,20x5, when the spot rate was P.45. The spot rate
was P.60 on April 8, 20x4, and was P.55 on December 31, 20x4. For the year ended December 31, 20x5, TT should
report a gain of:
CB Co. purchased merchandise for 300,000 FCUs from a vendor in a foreign country on November 30, 20x4. Payment in FCUs was
due on January 30, 20x5. The exchange rates to purchase 1 FCU were as follows:
Nov. 30, 20x4
Dec. 31, 20x4
Spot Rate
P1.65
P1.62
30-day rate
1.64
1.59
60-day rate
1.63
1.56
In its Dec 31 20x4, income statement, what amount should CB report as a foreign exchange gain?
Upon arrival in a foreign country, Karen exchanged P1,000 into 480,000 FCs. While returning after her two month visit,
she exchanged her remaining 50,000 FC into P100. What amount of gain or a loss did Karen experience on the 50,000
FCs she held during her visit and converted to Pesos at the departure date?
Mint Corporation has several transactions with foreign entities. Each transaction is denominated in the local currency unit of the
country in which the foreign entity is located. On October 1, 20x4, Mint purchased confectionary items from a foreign company at a
price of LCU 5,000 when the direct exchange rate was 1 LCU = P1.20. The account has not been settled as of Dec 31, 20x4, when the
exchange rate has decreased to 1 LCU = P1.10. The foreign exchange gain or loss on Mints records at year-end for this transaction
will be:
Mint Corporation has several transactions with foreign entities. Each transaction is denominated in the local currency
unit of the country in which the foreign entity is located. On November 2, 20x4, Mint sold confectionary items from a
foreign company at a price of LCU 23,000 when the direct exchange rate was 1 LCU = P1.08. The account has not been
settled as of Dec 31, 20x4, when the exchange rate has decreased to 1 LCU = P1.10. The foreign exchange gain or loss
on Mints records at year-end for this transaction will be:

On Sept. 3, 20x4, Jackson Corporation purchases goods for a Phil Peso equivalent of P17,000 from a foreign company. The transaction
is denominated in foreign currency. The payment is made on October 10. The exchange rates were:
Sept 3: 1 FC = P.85
Oct 10: 1 FC = .90
What entry is required to revalue foreign currency payable to peso equivalent value on October 10?
On Dec 5, 20x4, Texas based Imperial Corporation purchased goods from a foreign supplier for 100,000 FC, to be paid on January 10,
20x5. The transaction is denominated in foreign currencies. Imperials fiscal year ends on December 31, and its reporting currency is
the peso. The exchange rates are:
December 4, 20x4 1 FC = P.265
December 31, 20x4 1 FC = P.262
January 10, 20x5 1 FC = P.264
What journal entry would Imperial make on Dec 31, 20x4, to revalue foreign currency payable to equivalent peso value?
What journal entry would Imperial make on January 10, 20x5, to revalue foreign currency payable to equivalent peso value?
What was the overall foreign currency gain or loss on the accounts payable transactions?
Company X denominated a December 1, 20x4, purchased of goods in a currency other than its functional currency. The
transaction resulted in a payable fixed in terms of the amount of foreign currency and was paid on the settlement
date, January 10, 20x5. Exchanged rates moved unfavorably at December 31, 20x4 resulting that should:
a. Be included as a separate component of SHE at Dec. 31, 20x4
b. Be included as a component of income from continuing operations for 20x4
c. Be included as a deferred charge at December 31, 20x4
d.
Not be reported until January 10, 20x5, the settlement date
On 11/4/x6, a domestic exporter sold inventory to a foreign firm for 100,000 FCUs. On that date, the direct exchange rate was P.70. At
12/31/x6, the direct exchange rate was P.67. On 1/7/x7, when the direct exchange rate was P.71, the domestic exporter received full
payment of 100,000 FCUs. In the exporters 20x6 FSs what should be reported as an FX gain or loss?
On 10/5/x6, a domestic importer acquired inventory from a foreign firm for 100,000 FCUs. On that date, the direct
exchange rate was P.80. At 12/31/x6, the direct exchange rate was P.84. On 1/10/x7, when the direct exchange rate
was P.85, the domestic importer made full payment of 100,000 FCUs. In the exporters 20x6 FSs what should be
reported as an FX gain or loss?
On 10/19/x6, Dell Inc., ordered inventory from a foreign firm. The terms specified FOB shipping point and payment of 1,000,000 FCUs.
On 12/20/x6, the foreign vendor shipped the inventory and invoiced Dell. Dell paid the invoice on 1/7/x7. The direct spot exchange
rates for the euro on the respective dates follow:
10/19/x6
P.802
12/20/x6
P.798
12/31/x6
P.795
1/7/x7
P.793
In Dells 20x6 financial statements, what should be reported for the following items?
On 11/4/x6, Patt Inc., received an inventory order from a foreign firm. The terms specified FOB shipping point and
payment of 1,000,000 FCUs 45 days after delivery. On 12/15/x6, Patt shipped the inventory and billed the customer.
Patt received the customers remittance in full on 1/20/x7. The direct spot exchange rates for the FCU on the
respective dates follow:
11/4/x6
P.183
12/15/x6
P.181
12/31/x6
P.180
1/20/x7
P.175
In Patts 20x6 financial statements, what should be reported for the following items?
White Corporation, a Phil .company, purchased inventory from Gold Enterprises, a foreign supplier on November 16 for 70,000 FCUs.
Payment is due on January 16 and Whites accounting period ends on December 31. The spot rates on November 16, December 31,
and January 16 are 1 FCU = P.65, P.72 and P.69, respectively.
What is the Peso amount of inventory recorded in the accounting records on November 16?
What is the peso amount of inventory on the December 31 balance sheet?
What is the peso amount of accounts payable on the December 31 balance sheet?
What is the peso amount of the exchange loss or gain recorded on the income statement at December 31?
What is the peso amount of the exchange loss or gain recorded on the income statement at January 16?
Echo Inc., a Phil company, sold materials to Radar Corporation, a foreign customer on October 26 for 25,000 FCUs.
Payment is due on March 1 and Echos accounting period ends on December 31. The Spot rates on October 26, Dec31
and March1 are 1 FCU= P1.14, P1.06 and P1.09, respectively.
What is the peso amount of sales recorded in the accounting records on October 26?
What is the peso amount of accounts receivable on the December 31 balance sheet?
What is the peso amount of the exchange loss or gain recorded on the income statement at December 31?
What is the peso amount of the exchange loss or gain recorded on the income statement at March 1?
On July 1, 20x2, CDN purchased inventory from its foreign supplier RNB Enterprises at a cost of 1,000 FCUs. CDNs year end is on July
31. Some important dates regarding this transaction, as well as the exchange rates in effect at each of these dates are shown below:
Transaction Date, July 31,20x2:
1 FCU = P0.82
Year end, July 31, 20x2:
1 FCU = P0.81
Settlement date, July 31, 20x2:
1 FCU = P0.8050
What was the amount paid to RNB by CDN at the settlement date?
At what amount would CDN record its inventory purchase from RNB at the time of purchase?

At what amount would CDN record its liability to RNB at the time of purchase?
What would be the amount of the foreign exchange gain or loss recorded at the balance sheet date under the one-transaction
approach?
What would be the amount of the foreign exchange gain or loss recorded at the balance sheet date?
What would be the amount of the foreign exchange gain or loss recorded at the settlement date?

XYZ Corp has a calendar year end. On January 1, 20x0, the company borrowed 5,000,000 FCU from a foreign bank. The
loan is to be repaid on Dec 31, 20x3 and requires interest at 5% to be repaid every Dec 31. The loan and applicable
interest are both to be repaid in pesos. XYZ does not hedge to minimize its foreign exchange risk. The following
exchange rates were in effect throughout the term of the loan:
January 1, 20x0
FCU 1 = P1.1500
Dec 31, 20x0
FCU 1 = P1.1490
Dec 31, 20x1
FCU 1 = P1.1485
Dec 31, 20x2
FCU 1 = P1.1483
Dec 31, 20x3
FCU 1 = P1.1487
The average rates in effect for 2010 and 2011 were as follows:
20x0:
FCU 1 = P1.1493
20x1:
FCU 1 = P1.1487
At what amount would XYZ record its initial loan liability on January 1, 20x0.
What is the amount of interest paid during 20x0?
What is the amount of the foreign exchange gain or loss on the principal recognized on the 20x0 income statement?
What is the amount of interest paid during 20x1?
Suppose the foreign exchange rates are:
1 Singaporean dollar = P.7025
1 HK dollar = P2.5132
Based on the information given above, the indirect exchange rates for the Singaporean dollar and the HK dollars are:
Based on information given above, how many Phil Pesos must be paid for a purchase of citrus fruits costing 10,000 HK dollars?
Based on the information given above, how many Singaporean dollars are required to purchase goods costing 10,000 Phil Pesos?
A Phil company purchases a 90-day certificate of deposit from a foreign bank on Sept 15. The certificate has a face
value of 1,000,000 FC, costs FC 800,000, and pays interest at an annual rate of 2 percent. On Dec 13, the certificate of
deposit matures and the company receives principal and interest of FC 1,005,000. The spot rate on Dec 14 is P0.77/FC
1. The average spot rate for the period Sept 15- Dec 13 is P0.79/FC1.
The exchange gain or loss on this investment is:
Interest income on the investment is reported at:
On November 15, 20x4, CC Inc. a Phil company, ordered merchandise FOB shipping point from a German company for 200,000 FCUs.
The merchandise was shipped and invoice on Dec 10, 20x4. CC paid the invoice on January 10, 20x5. The spot rates for FCU on the
respective dates were:
November 15, 20x4
P.4955
December 10, 20x4
P.4875
December 31, 20x4
P.4675
January 31, 20x5
P.4475
In CCs December 31, 20x4 income statement, the foreign exchange gain is:

On July 1, 20x4, BY Company borrowed 1,680,000 LCU from a foreign lender evidenced by an interest bearing note due
on July 1, 20x5 which is denominated in the currency of the lender. The Phil Peso equivalent of the note principal was
as follows:
Date
Amount
7.1.x4 (date borrowed)
P210,000
12.31.x4 (BYs year-end)
240,000
7.1.x5 (date repaid)
280,000
In its income statement for 20x5, what amount should BY include as a foreign exchange gain or los on the note
principal?
Greco Inc., a Phil corporation, bought machine parts from Franco Company of Germany on March 1, 20x4 for 70,000 FCU, when the
spot rate for FCU was P0.5395. Grecos year-end was March 31,20x4, when the spot rate for FCU was P0.5445. Greco bought 70,000
FCUs and paid the invoice on April 20, 20x4, when the spot rate was P0.5495. How much should be shown in Grecos income
statements as foreign exchange (transaction) gain or loss for the years ended March 31, 20x4 and 20x5?
On March 1, 20x4, Wilson Corporation sold goods for a peso equivalent of P31,000 to a foreign supplier. The
transaction is denominated in FC. The payment is received on May 10. The exchange rates were:
March 1: 1FC = P.31
May 10: 1 FC = P.34
What entry is required to revalue FC payable to peso equivalent value on May 10?
On 12/12/x6, a domestic exporter sold inventory to a foreign film for 100,000 FCUs. On that date, the direct spot rate was P.20. At
12/31/x6, the direct exchange rate was P.24. On 1/22/x7, when the direct spot rate was P.21, the domestic exporter received full
payment of 100,000 FCUs. In the exporters 20x6 FSs what should be reported as an FX gain or loss?

On 9/30/x6, a domestic exporter acquired inventory from an Italian film for 100,000 FCUs. On that date, the direct spot
rate was P.90. At 12/31/x6, the direct spot rate was P.85. On 1/7/x7, when the direct exchange rate was P.93, the
domestic importer made full payment of 100,000 FCUs. In the exporters 20x6 FSs what should be reported as an FX
gain or loss?
RD Corporation purchases memory on March 15 from a Taiwanese company for 6,500,000 FCUs. Payment for the inventory occurs on
May 15. The exchange rate is 1 FCU = P.029 on March 15 and 1 FCU = P.025 on May 15.
What is the amount recorded on RDs financial records for the inventory on March 15?
What is the amount on Exchange gain or loss recorded on RDs financial records on May 15?
What is the credit to cash when RD pays for the inventory on May 15?
Wizard Corporation sells inventory on June 20 to a German company 86,000 FCU. Payment occurs on August 10. The
exchange rate on June 20 is 1 FC = P1.016 and 1 FCU = P1.022 on August 10.
What is the amount recorded on Wizards financial records for the sale on June 20?
What is the amount on Exchange gain or loss recorded on Wizards financial records on August 10?
What is the debit to Cash when Wizard collects the Account Receivable on August 10?

On January 1, 20x4, HB Inc. issued 10,000,000 FCU of bonds payable. The bonds are due on Dec 31, 20x6. Over the life of the bonds,
the exchange rates were as follows:
January 1, 20x4
FCU 1 = P1.40
Dec 31, 20x4
FCU 1 = P1.45
Dec 31, 20x5
FCU 1 = P1.50
Dec 31, 20x6
FCU 1 = P1.48
Assume that exchange gains and losses on long-term monetary are recognized in income immediately. What is the exchange gain
(loss) recognized during 20x6? 20x5?
On January 1, 20x3, Original Pilipino Music (OPM), a manufacturer of high-end recording equipment based on a foreign
country, shipped 120,000 FCU worth of inventory to its main foreign distributor, with full payment of thesegoods to be
paid by February 28, 20x3. OPM has a January 31 year-end. A list of significant dates and exchange rates is shown
below.
Transaction date, January 1, 20x3:
FCU 1 = P1.1410
Year-end date, January 31, 20x3:
FCU 1 = P1.1420
Settlement date, February 28, 20x3:
FCU 1 = P1.1450
The invoice price billed by OPM was 120,000 FCUs.
At what value did OPM record the initial sale to its American distributor?
What is the amount of cash received by OPM on the settlement date?
What is the amount of OPMs foreign exchange gain or loss on February 28 th?
What is the TOTAL amount of OPMs foreign exchange gain or loss on this transaction?
On 11/10/x6, Buymax entered into a 60-day FX forward involving 100,000 FCUs to hedge a FCU payable arising from an importing
transaction. Direct exchange rates on the respective dates are as follows:
11/10/x612/31/x61/9/x7
Spot rate
P1.63
P1.60
P1.58
Forward rate (for 1/9/x7)
1.64
1.59
1.58
What is the FX gain or loss to be reported in earnings for 20x6 on the FX forward?
On 10/22/x6, Selmax entered into a 90-day FX forward involving 100,000 FCUs to hedge a FCU receivable arising from
an exporting transaction. Direct exchange rates on the respective dates are as follows:
10/22/x6
12/31/x6
1/30/x7
Spot rate
P.46
P.45
P.47
Forward rate (for 1/9/x7)
.45
.445
.47
What is the FX gain or loss to be reported in earnings for 20x6 on the FX forward?
Custom Enterprises makes a sale of 15,000,000 FCUs to a foreign customer on May 16 with payment due before July 10. Management
of Custom immediately enters into a forward contract to hedge this transaction. Custom prepares quarterly financial statements with
a Dec 31 year-end. The relevant exchange rates and forward contract fair values are as follows:
Date
Spot Rate
July 10 Forward Rate
Forward Contract Fair Value
May 16
P.0092
P.0093
P0
June 30
P.0094
P.0090
P4,500
July 10
P.0091
P.0091
P3,000
What is the balance in the accounts receivable account on May 16?
What is the balance in the accounts receivable account on June 30?
What is the amount of the exchange loss or gain recognized with respect to the AR account on June30?
What is the balance in the accounts receivable account on July 10, immediately before collection?
What is the amount of the exchange loss or gain recognized with respect to the AR account on July 10?
What is the balance of the forward contract account on May 16?
What is the balance of the forward contract account on June 30?
What is the amount of the exchange loss or gain recognized with respect to the forward contract on June 30?
What is the balance in the forward contract account on July 10, immediately before collection?
What is the amount of the exchange loss or gain recognized with respect to the Forward Contract on July 10?
Valley Enterprises purchase inventory of 1,000,000 FCUs from a foreign supplier on August 13 with payment due on
November 1. Management of Valley Enterprises immediately enters into a forward contract to hedge this transaction.
Valley prepares quarterly financial statements with a Dec 31 year-end. The relevant exchange rates and forward
contract fair values are as follows:

What
What
What
What
What
What
What
What
What

Date
Spot Rate
July 10 Forward Rate
Forward Contract Fair Value
Aug 13
P1.116
P1.120
P0
Sept 30
P1.129
P1.126
P6,000
Nov 1
P1.138
P1.138
P18,000
is the balance in the accounts payable account on Aug 13?
is the balance in the accounts payable account on Sept 30?
is the amount of the exchange loss or gain recognized with respect to the AP account on Sept 30?
is the balance in the accounts payable account on November 1, immediately before collection?
is the balance of the forward contract account on Aug 13?
is the balance of the forward contract account on Sept 30?
is the amount of the exchange loss or gain recognized with respect to the forward contract on Sept 30?
is the balance in the forward contract account on Nov 1?
is the amount of the exchange loss or gain recognized with respect to the AP account on Nov 1?

Myway Company sold equipment to a foreign company for 100,000 FCs on January 1, 20x4 with settlement to be in 60 days. On the
same date, Alman entered into a 60-day forward contract to sell 100,000 FC at a forward rate of 1 FC = P.94 in order to manage its
exposed foreign currency receivable. The forward contract is not designated as a hedge. The spot rates were:
January 1: 1 FC = P0.945
March 1: 1 FC = P0.930
The entry to revalue foreign currency payable to current peso value on march 1 will have:
What is the overall effect on Net Income of Myways use of the forward exchange contract?
Had Myway not used the forward exchanged contract, net income for the year would have:
Spartan Company purchased interior decoration material from a foreign supplier for 100,000 foreign currencies (FC)
on Sept 5, 20x4, with payment due on Dec 2, 20x4. Additionally, on Sept 5, Spartan acquired a 90-day forward contract
to purchase 100,000 foreign currencies of 1 FC = P.1850. The forward contract was acquired to manage exposed net
liability position in foreign currency, but it was not designated as a hedge. The spot rates were:
Sept 5, 20x4
1 FC = P0.1835
Dec 2, 20x4
1 FC = P0.1865
In the entry made on Dec 2nd to revalue foreign currency receivable to current equivalent peso value;
What is the entry required to settle foreign currency payable on Dec 2?
Stark Inc. placed an order for inventory costing 500,000 FC with a foreign vendor an April 15 when the spot rate was 1 FC = P.683.
Stark received the goods on May 1 when the spot rate was 1 FC = P.687. Also on May 1, Stark entered into a 90-day forward contract
to purchase 500,000 FC at a forward rate of 1 FC = .693. Payment was made to the foreign vendor on Aug 1 when the spot rate was
P.696. Stark has a June 30 year-end. In that date, the spot rate was 1 FC = P.691, and the forward rate on the contract was 1 FC =
P.695. Changes in the current value of the forward contract are measured as the present value of the changes in the forward rates
over time. The relevant discount rate is 6%.
The foreign exchange gain or loss on hedging instrument (forward contract) on June 30 amounted to:
The net income effect on June 30 amounted to:
The foreign exchange gain due to hedging instrument (forward contract) on Aug 1 amounted to:
JJ restaurants purchased green rice, a special variety of rice, from a foreign country for 100,000 FCs on Nov 1, 20x4.
Payment is due on January 30, 20x5.
On Nov 1, 20x4, the company also entered into a 90-day forward contract to purchase 100,000 FC. The forward
contract is not designated as a hedge. The rates were as follows:
Date
Spot rate
Forward Rate for Mar 1
Nov 1, 20x4
P.120
P.126 (90 days)
Dec 31, 20x4
P.124
P.129 (30 days)
Jan 30, 20x5
P.127
The entry on Nov 1 20x4 to record the forward contract includes a: (JE)
The entries on Dec 31, 20x4, include a:
The entries on January 30, 20x5, include a: