Foreign Currency

1. On September 1, 2014, Bain Corp. received an order for equipment from a foreign customer for 300,000 local currency units (LCU) when the peso equivalent was 96,000. Bain shipped the equipment on October 15, 2014, and billed the customer for 300,000 LCU when the peso equivalent was P100, 000. Bain received the customer’s remittance in full on November 16, 2014, and sold the 300,000 LCU for 105,000. In its income statement for the year ended December 31, 2014, Bain should report a foreign exchange transaction gain of a. 0 b. 4,000 c. 5,000 d. 9,000

2. On September 9, 2016, Selma Inc. accepted a non-cancellable merchandise sales order from a Japanese firm. The contract price as 100 000 yens. The merchandise was delivered on December 14, 2015. The invoice was dated December 11, 2015, the shipping date (FOB Shipping Point). Full payment was received on January 22, 2016. The spot direct exchange rates for the Japanese yens on the respective date were as follows: September 9, 2015 – P0.75 December 31, 2015 – P.73 December 11, 2015 – P.78 January 22, 2016 – P.725 December 14, 2015 – P.77 What is the reportable sales amount in the 2015 income statement? a. P73,000 c. P77,000 b. P75,000 d. P78,000 3. Using the information in No. 1, what is the reportable foreign exchange gain or loss amount in 2015 income statement? a. P2000 gain c. P5000 loss b. P4000 loss d. P5000 gain 4. Using the same information in No.1, what is the reported value of the receivable from the customer at December 31, 2015? a. P73,000 c. P77,000 b. P75,000 d. P78,000 5. On April 1, 2015, Argo Company imported 10,000,000 barrels of oil from an Indonesian Company at a price of P3,185 per barrel payable in Indonesian rupiah. The invoice was paid 30 days later. Indirect exchange rates for the Indonesian rupiah were: April 1, 2008: P1 = 132 rupiah April 30, 2008: P1 = 130 rupiah

What is the cost of the oil? a. P132 million rupiah b. P130 million rupiah

c. P31.85 billion d. P1.32 billion

6. Domestic Company has an accounts payable in the amount of 10,000 Bahrain Dinar on its books on October 1, 2015. This account was unpaid at the end of the fiscal year, October 31, 2015. The spot rate for the dinar was: October 1, 2015: 1 Dinar = P131 October 31, 2015 : 1 Dinar = P133 On October 31, 2015, Domestic Company should report: a. b. c. d.

An accounts payable of P1,310,000 An accounts payable of P1,330,000 An accounts payable of 10,000 Bahrain Dinar An exchange gain of P20,000

7. Juan, a Philippine Corporation, bought inventory items from a supplier in Germany on November 5, 2015 for 100,000 marks, when the spot rate was P21. At Juan’s December 31, 2015, year end, the spot rate was P20.5. On January 15, 2016, Juan bought 100,000 marks at the spot rate of P20.90 and paid the invoice. How much should Juan report in its income statements for 2016 and 2017 as foreign exchange transaction gain or (loss)? 2016 2017 2016 2017 a. P (50 000) P40 000 c. P 0 P10,000 b. 50 000 (40 000) d. 10 000 0 8. On September 1, 2016, Pedro & Co., a Philippine corporation, sold merchandise to a foreign firm for P250, 000 francs. Terms of the sale require payment in francs on February 1, 2017. On September 1, 2016, the spot exchange rate was P6.27 per franc. At December 31, 2011 Pedro’s year end, the spot rate was P6.00 but the rate increased to P6.30 by February 1, 2017. When payment was received, how much should Pedro report as foreign exchange transaction gain or (loss) in its income statement?

2016 a. P67,500 b. (67,500)

2017 P(75,000) 75,000

c. d.

2016 P 0 7,500

2017 P7,500 0

9. On July 1, 2016, Asser Company borrowed 1,680,00 local currency units (LCU) from a foreign lender, evidenced by an interest bearing note due on July 1, 2017,

which is denominated in the currency of the lender. The Philippine peso equivalent of the note principal was as follows: DATE 7/1/2016 (date borrowed) 12/31/2016 (Asser’s year-end) 7/1/2017 (date repaid)

AMOUNT P210, 000 P240, 000 P280, 000

In its income statement, what amount should Asser include as a foreign exchange gain or (loss)? 2016 a. P30, 000 b. (30,500)

2017 P40,000 (40,000)

2016 c. d.

P 0 (30,000)

2017 P(70,000) 0

10. On July 21, 2016, Bato Company lent P120, 000 to a foreign supplier, evidenced by an interest bearing note due on July 1, 2017. The note is denominated in the currency of the borrower and was equivalent to P840, 000 local currency units (LCU) in the loan date. The note principal was appropriately included at P140, 000 in the receivables section of Bato’s December 31, 2016 balance sheet. The note principal was repaid to Bato on July 1, 2017 due date when the exchange 8 LCU in P1. In its income statement for the year ended December 31, 2017, what amount should Bato include as a foreign exchange rate transaction gain or loss? a. P 0 c. P15,000 gain b. P15,000 loss d. P35,000 loss 11. On September 1, 2016, Rosan Corp. received an order for equipment from a foreign customer for P300,000 local currency units (LCU) when the Philippine peso equivalent was P96,000. Rosan shipped the equipment on October 15, 2016, and billed the customer for 300,000 LCU when he Philippine peso equivalent was P100,000. Rosan received the customer’s remittance in full on November 16, 2016, and sold the 300,000 LCU for 105,000. In its income statement for the year ended Decmber 31, 2016, Rosan should report a foreign transaction gain of: a. P 0 c. P5,000 b. 4,000 d. 9,000 12. Brisco Bricks purchases raw material from its foreign supplier, Bolivian Clay, on May 8. Patment of 2,000,000 foreign currency units (FC) is due in 30 days. May 31 is Brisco’s fiscal year end. The pertinent exchange rates were as follows: May 8

Spot Rate:

P1.25

May 31 June 7

Spot Rate: Spot Rate:

P1.26 P1.20

For what amount should Brisco’s Accounts Payable be credited on May 8? a. P2,500,000 b. P2,440,000

c. P1,600,000 d. P1,639,344

13. Using the same information in No. 11, how much foreign currency will it cost Brisco to finally pay the payable on June 7? a. P1,666,667 c. P2,520,000 P2,440,000

d. P2,400,000