FINAL DEPARTMENTAL QUIZ

1. These are the financial statements of a group in which the assets, liabilities, equity,
income, expenses and cash flows of the parent and its subsidiaries are presented as
those of a single economic entity.
a. Consolidated financial statements.
b. General purpose financial accounting.
c. Separate financial statements.
d. Group financial statements.

2. This is defined as the financial statements presented by a parent in which the

investments are accounted for on the basis of the direct equity interest.
a. Single financial statements.
b. Combined financial statements.
c. Separate financial statements.
d. Consolidated financial statements.

3. A “group” for consolidation purposes is

a. A parent and all of its subsidiaries.
b. An entity that has one or more subsidiaries.
c. An entity, including an unincorporated entity such as partnership that is controlled by
another entity.
d. An entity that obtains control over other entities or businesses.

4. Control is presumed to exist when the parent owns directly or indirectly through
subsidiaries
a. More than half of the equity of an entity.
b. More than half of the ordinary shares of an entity.
c. More than half of the preference and ordinary shares of an entity.
d. More than half of the voting power of an entity.

5. Non-controlling interest shall be presented

a. Separately from liabilities and the parent shareholder’s equity
b. Within equity, separately from the parent shareholder’s equity
c. As noncurrent liability
d. As component of the parent shareholder’s equity

6. Under PAS 21, which of the following statements pertains to functional currency?

a. It refers to the currency of the primary economic environment in which the entity
operates.
b. It refers to the currency in which the financial statements are presented.
c. It refers to the currency other than the functional currency of the entity.
d. It refers to the type of currency in a given jurisdiction which a creditor may be
compelled to accept.

7. Under PAS 21, monetary items are cash or elements of financial statements which
are receivable or payable in a fixed amount of cash. Which of the following is a
monetary item?

a. Sales
b. Income tax payable
c. Unearned revenue
d. Inventory

8. Which of the following is a nonmonetary item?

a. Prepaid asset
b. Loan receivable
c. Accounts payable

1|Page
 d. Interest payable

9. Under PAS 21, what is the initial measurement of foreign currency denominated
transaction?

a. Both monetary and nonmonetary items are measurement initially at transaction

or historical rate.
b. Monetary items are measured at closing rate while nonmonetary items are
measured at transaction rate.
c. Monetary items are measured at transaction rate while nonmonetary items are
measured at closing rate.
d. Both monetary and nonmonetary items are measurement initially at closing rate.

10. Under PAS 21, what is the subsequent measurement of nonmonetary items?

a. Closing rate
b. Transaction rate
c. Average rate
d. Monthly rate

11. Under PAS 21, what is the subsequent measurement of monetary items?

a. Closing rate
b. Transaction rate
c. Average rate
d. Monthly rate

12. Under PAS 21, what is the subsequent measurement of nonmonetary items
subsequently measured at fair value?

a. Closing rate
b. Transaction rate
c. Exchange rate at the date when the fair value was determined
d. Average rate

13. PAS 21 provides that the exchange differences/(gain/loss) arising on the settlement
or translating foreign currency transaction shall be recognized in

a. Profit or loss
b. Other comprehensive income
c. Share premium
d. Retained earnings

14. Which of the following items will result to foreign currency transaction gainl/loss due
to settlement or translation?

a. Foreign currency denominated income statements accounts such as revenue,

income, expense or loss.
b. Foreign currency denominated non-monetary assets such as inventory, PPE,
intangible asset or prepaid asset.
c. Foreign currency denominated monetary items such as accounts payable,
accounts receivable, notes payable, loans receivable or interest payable.
d. Foreign currency denominated non-monetary liabilities such as unearned
revenue, warranty liability, deferred tax liability.
e. Foreign currency denominated equity accounts such as ordinary shares,
preference shares, treasury shares and share premium.

15. Under PAS 21, when there is a change in the entity’s functional currency, how shall
the entity apply the translation procedures applicable to the new functional currency?

a. It shall be applied prospectively from the date of change.

b. It shall be applied retrospectively from the date of change.

2|Page
 c. It shall be applied retrospectively from the reasonably possible date.
d. It shall be applied retrospectively as a prior period error.

16. The unadjusted accounts of PRIMER CORPORATION of the Philippines at

December 31, 2016 that relate to its forward contracts are summarized as follows:

 Forward contract payable to BPI in Philippines pesos amounting to P133,000, for the
Changi Corporation hedge.

 Forward contract receivable from Metro Bank in Philippine pesos amounting to

P294,000, intended to hedge a foreign currency commitment to KBS Co. of Korea
due in 90-days from December 1, 2016.

 Accounts Payable to Changi Corporation of Singapore amounting to P127,750,

billing was for 10,000,000 Singapore dollars worth of merchandise.

 Forward contract receivable from BDO in Thailand Baht amounting to P227,500, for
speculation to purchase 200,000 baht in 90-days from December 1,2016.

 Forward contract payable to Metro Bank in Korean Won amounting to P294,000,

intended to hedge a 100,000 Won sales commitment with KBS Co. of Korea.

 Forward contract receivable from BPI in Singapore dollars amounting to P133,000,

which is to hedge payable to Changi Corporation for120-days from November
2,2016.

 Forward contract payable to BDO in Philippine pesos amounting to P227,500, for

speculation in Thailand Baht.

Direct Exchange rates at December 31, 2016 were as follows:

Baht Singapore Dollars Won

Closing selling rate 1.12 .013125 3.00125
Closing buying rate 1.10 .013020 3.00100

Forward rates to purchase Thailand Baht and Singapore Dollars and sell Korean Won:

Baht Singapore Dollars Won

30-day futures 1.155 .0133 2.975
60-day futures 1.1725 .013475 2.9575
90-day futures 1.19 .01365 2.94
120-day futures 1.2075 .013825 2.9225

On December 31, 2016, how much is the amount of total current assets of Primer?

a. 663,250
b. 528,500
c. 665,000
d. 666,750

17. On December 31, 2016 how much is the amount of total current liabilities of Primer?

a. 787,500
b. 656,250
c. 560,000
d. 918,750

18. In Primer’s income statement for the year ended December 31, 2016, what amount of
FOREX gain(loss) should be reported from the forward contract for speculation?

a. 1,750
b. 7,000

3|Page
 c. (1,750)
d. (7,000)

19. In Primer’s income statement for the year ended December 31, 2016, what amount of
FOREX gain(loss) should be reported from the change in the fair value of the Underlying
sales commitment?

a. (1,750)
b. 7,000
c. (7,000)
d. 1,750

20. In Primer’s income statement for the year ended December 31, 2016, what amount of
FOREX gain(loss) should be reported from the hedged item in an exposed liability
position?

a. (3,500)
b. (2,500)
c. (7,000)
d. (1,750)

21. On October 1, 2016, the company took delivery from a Bahrain firm of inventory costing
850,000 dinar. Payment is due on January 30, 2017. 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.

Market Price Fair value of the call option

October 1, 2016 9.400 11,700
December 31, 2016 9.423 23,200
January 30, 2017 9.435 29,750

If changes in the time value will be excluded from the assessment of hedge
effectiveness, what is the forex gain (loss) on the hedging instrument due to change in
the ineffective portion on December 31, 2016?

a. 8,050
b. (8,050)
c. 19,550
d. (19,550)

22. If changes in the time value will be included in the assessment of hedge
effectiveness, what is the forex gain (loss) in the hedging instrument in 2017?

a. 5,250
b. 7,650
c. (4,300)
d. 6,550

23. If split accounting is used in the assessment of hedge effectiveness, what is the forex
gain (loss) on the option contact due to change in intrinsic value on December 31, 2017?

a. 10,200
b. 5,100
c. 12,750
d. (7,500)

4|Page
24. On May 1, 2016, GYM Co. anticipated the purchase of 245,000 of merchandise from a
foreign vendor. The purchase would probably occur on September 25, 2016 and require the
payment of 4,375,000 foreign currencies (FC).

On May 1, 2016, the company purchased a call option to buy 4,375,000 FC at a strike price of
1FC = P0.77.

An option premium of P49,000 was paid. Changes in the value of the option will be
excluded from the assessment of hedge effectiveness.

For the year 2016, the following rates are as follows:

May 1 May 31 June 30 September 25

Spot Rate P0.75 P0.79 P0.81 P0.82
FV of call option ? P103,250 P182,000 ?

What is the gain (loss) on option contract that would affect equity on June 30?

a. 175,000
b. (175,000)
c. (87,500)
d. 87,500

25. What is the gain (loss) on option contract that would affect earnings on June 30?

a. (8,750)
b. 42,000
c. 4,200
d. 87,500

26. On October 1, 2016, Davao Philippines took delivery from Ohio, USA firm of inventory
costing $1,425,000. Payment is due on January 30, 2017.

Concurrently, Davao Philippines paid an amount of cash to acquire an at-the-money call

option for the $1,425,000.

 The option premium paid is P19,625

 The spot price at the inception date is P44.40
 The spot price at the statement of financial date is P44.423
 The effective portion of the option contract on January 30, 2017 amounts to
P38,475
 The gain on the derivative instrument on January 30, 2017 using non-split
accounting amounts is to P3,225

What is the gain (loss) on hedging instrument due to change in the ineffective portion on
December 31, 2016?

a. 17,150
b. 5,700
c. (17,150)
d. (5,700)

27. What is the gain (loss) on hedging instrument due to change in the effective portion
on December 31, 2017?

a. 5,700
b. (5,700)
c. 3,225
d. (3,225)

5|Page
1The following data were taken from the trial balance on December 31, 2017 of Foreign Co., a
subsidiary of Philippine Co.

Total Assets 21,750

Total Liabilities 11,500
Shareholder's Equity
Ordinary shares 5,000
Retained earnings ( January 1, 2017) 2,500
Sale
s 90,000
Cost of goods sold 80,000
Depreciation expense 1,500
Other operating expenses 5,750

Additional Information:

a. The balance of the exchange differences on translating foreign operation account at

December 31, 2016 was P50,000 credit.
b. The translated balance of retained earnings in Philippine peso at December 31, 2016 was
P119,500.
c. When Foreign Co., was incorporated, the exchange rate was 1FC = P67.20. no ordinary
share changes had occurred since then.
d. The following data were the exchange rates during the year:

January 1, 2017 1FC = P67.40

December 31, 2017 1FC = P67.60
Average for 2017 1FC = P67.50

28. What is the cumulative translation adjustment to be reported at December 31, 2017?

a. 51,775 credit
b. 51,775 debit
c. 50,775 credit
d. 50,775 debit

29. What is the translation adjustment for the year 2017?

a. 1,775 debit
b. 1,775 credit
c. 775 debit
d. 775 credit

The following data are taken from the records of Elite Imports Company, a foreign subsidiary in
New Zealand:

NZ dollar
Total Assets 12/31/2017 146,000
Total Liabilities 12/31/2017 45,000
Common Stock 12/31/2017 60,000
Retained Earnings 12/31/2017 29,000
NetIncome 2017 15,000
Dividends Declared 12/31/2017 3,000

Exchange rates:
Current rate P10
Historical rate 11
Weighted Average Rate 12

6|Page
The peso balance of retained earnings on December 31, 2016 is P325,000.

30. What amount of Cumulative Translation Adjustment is reported in the Consolidated

Statements of Financial Position on December 31, 2017?
a. 122,000 debit
b. 116,000 credit
c. 125,000 debit
d. 125,000 credit

Galaxy Corporation acquired 80% of the outstanding shares of United Company on June 1,
2016 for P3,517,500. United Company’s stockholders equity components at the end of this year
as follows: Ordinary shares, P100 par, P1,500,000, Share premium P675,000 and Retained
earnings P1,335,000. Non-controlling interest is measured at fair value and the fair value is
P705,000. The assets of united were fairly valued, except for inventories, which are overstated
by P66,000 and equipment which was understated by P90,000. Remaining useful life of
equipment is 4 years. Stockholder’s equity of Galaxy on January 1, 2016 is composed of
ordinary shares P4,500,000, Share Premium P1,050,000, Retained Earnings P3,150,000.
Goodwill, if any, should be written down by P85,350 at year-end. Net income for the first year of
parent is P450,000 and the net income of subsidiary from the date of acquisition is P255,000.
Dividends declared at the end of the year amounted to P120,000 and P90,000. During the year,
there was no issuance of new ordinary shares.

31. How much is the non-controlling interest in net assets on December 31, 2016?

a. 871,005
b. 763,455
c. 745,455
d. 731,505

32. What is the amount of consolidated shareholder’s equity?

a. 9,122,070
b. 9,853,575
c. 8,773,575
d. 9,867,525

GV Company purchased 70% ownership of DL Company on January 1, 2016 at underlying

book value. While each company had its own sales forces and independent product lines, that
were substantial intercorporate sales of inventory each period. The following intercoporate sales
occurred during 2017 and 2018:

Cost of Sales Unsold at Year Sold

Year Seller Product Sold Buyer Price End of Year to Outsiders
2017 GV Co. 448,000 DL Co. 640,000 140,000 2018
2018 DL Co. 312,000 GV Co. 480,000 77,000 2019
2018 GV Co. 350,000 DL Co. 437,500 63,000 2019

The following data summarized the results of their financial operations for the year ended
December 31, 2018:

GV Company DL Company
Sales 3,850,000 1,680,000
Gross Profit 1,904,000 504,000
Operating Expenses 770,000 280,000
Ending Inventories 336,000 280,000
Dividend Received from affiliate 126,000 -
Dividend Received from nonaffiliate - 70,000

7|Page
33. What are the consolidated sales and consolidated cost of goods sold at the end of 2018?

a. 4,612,500 and 2,457,550

b. 4,612,500 and 2,206,950
c. 4,612,500 and 2,202,050
d. 5,530,000 and 2,202,050

34. What is the consolidated net income attributable to parent shareholder’s equity and non-
controlling interest in net income at the end of 2018?

a. 1,301,335 and 59,115

b. 1,476,335 and 59,115
c. 1,476,335 and 80,115
d. 1,350,335 and 80,115

On January , 2016, RX Company purchased 80% of the shares of MB Corporation at book

value. The shareholders’ equity of MB Corporation on this date showed: Ordinary Shares –
P570,000 and Retained Earnings – P490,000. On April 30, 2016, RX Company acquired a used
machinery for P84,000 from MB Corp. that was being carried in the latter’s books at P105,000.
The asset still has a remaining useful life of 5 years. On the other hand, on August 31, 2016,
MB Corp. purchased an equipment that was already 20% depreciated from RX Co. for
P345,000. The original cost of this equipment was P375,000 and had a remaining life of 8
years. Net income of RX Co. and MB Corp. for 2016 amounted to P360,000 and P155,000.
Dividends paid totaled to P115,000 and P52,500 for RX Co. and MB Corp., respectively.

35. In the consolidated financial statements in 2016, what is the non-controlling interest
in the net assets?

a. 236,140
b. 232,500
c. 223,500
d. 263,140

8|Page