Chapter 19

Problem I
1.

Indirect Exchange Rates

Philippine Viewpoint:
1 $ = P40; 1 Peso = $0.025 ($1/P40)
1 Singapore dollar = P32.00; 1 Peso = 0.03125 Singapore (1 Singapore Dollar/P32)

2.

FCU

Peso
Direct Exchange Rate

P8,000
P40.00

$200; or

= P8,000 x $1/P40 = $200

3.

4,000 Singapore dollars x P32 = P128,000

Problem II
a. Exchange rates:

Direct
Exchange Rate

Indirect
Exchange Rate

Arrival Date

Departure Date

1 Singapore dollar = P33.00

1 Singapore Dollar = P32.50

(P33,000 / 1,000 Singapore

dollars)

(P3,250 / 100 Singapore

dollars)

P1.00 = .03 Singapore dollars

P1.00 = .03 Singapore dollars

(1,000 Singapore dollars /

P33,000)

(100 Singapore dollars /

P3,250))

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 =
Departure date
100 dollars x P32.50 =
Foreign Currency Transaction Loss

P3,300
3,250
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

Settlement
Currency

Direct Exchange Rate

Increases

Indirect Exchange Rate

Increases

Decreases

NA
L

NA
G

NA
G

NA
L

NA
G

NA
L

NA
L

NA
G

Purchases..
Accounts payable ($24,000 x P40.55)

973,200

Exporting
Exporting

Peso

Decreases

LCU
Peso
LCU

Problem IV
1.
December 1, 20x4 (Transaction date):
973,200

December 31, 20x4 (Balance sheet date):

Foreign currency transaction loss...
Accounts payable [$24,000 x (P40.80 P40.55)]
Accounts payable valued at 12/31 Balance Sheet
($24,000 x P40.80)
Accounts payable valued at 12/1 Date of Transaction
($24,000 x P40.55)
Adjustment to accounts payable needed..

6,000
6,000

P979,200
973,200
P 6,000

March 1, 20x5 (Settlement date):

Accounts payable
Foreign currency transaction gain [$24,000 x (P40.80 P40.65)]
Cash ($24,000 x P40.65).

979,200
3,600
975,600

2.
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

December 31, 20x4 (Balance sheet date):

Accounts receivable..
Foreign currency transaction gain [$60,000 x (P40.70 P40.00)]
Accounts receivable valued at 12/31 Balance Sheet
($60,000 x P40.70)
Accounts receivable valued at 12/1 Date of Transaction
($60,000 x P40.00)
Adjustment to accounts receivable needed..

42,000
42,000

P2,442,000

2,400,000
42,000

March 1, 20x5 (Settlement date):

Cash ($60,000 x P40,60)..
Foreign currency transaction loss
Accounts receivable ($60,000 x P40.70).

2,436,000
6,000
2,442,000

2.
a.
a.1. None transaction date
a.2. P42,000 gain
a.3. P6,000 loss (March 1, 20x5)
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

To record the purchase of shares in Pineapple Computers at a cost of

$96,000 at the exchange rate of P40.

December 10, 20x4 (Transaction date):

Equipment
Cash

636,000
636,000

To record the purchase of equipment costing 12,000 euros at the

exchange rate of P53.

December 31, 20x4 (Balance sheet date):

Equity investment (FVTPL)/Financial Asset
Unrealized gain in fair value of equity investment (financial asset)
To record gain in fair value of Pineapple Computers share.
12/31/x4: Revalued Investment and translated at the rate on
the date of revaluation (closing/current rate):
(1,200 units x $100 x P40.50).
11/1/x4: Investment, cost (1,200 units x $80 x P40.00)
Unrealized gain on equity investment
Less: Foreign currency transaction gain equity investment

1,020,000
1,020,000

P4,860,000
3,840,000
P1,020,000

11/1/20x4: Date of transaction (1,200 units x $80 x P40)..

Less: 12/31/20x4: B/S Date (1,200 units x $80 x P40.50).
Other unrealized gain in the fair value of equity investment...

P3,840,000
3,888,000

Foreign currency transaction loss...

Accounts payable [$96,000 x (P53.20 P53)]

48,000
P 972,000

19,200
19,200

To record exchange loss on accounts payable in euros.

Accounts payable valued at 12/31 Balance Sheet

(1,200 x $80 x P53.20)
Accounts payable valued at 12/1 Date of Transaction
(1,200 x $80 x P53.00)
Adjustment to accounts payable needed..

5,107,200

5,088,000
19,200

February 3, 20x5 (Settlement date):

Accounts payable
Foreign currency transaction loss [$96,000 x (P53.80 P53.20)]
Cash ($96,000 x P53.80).

5,107,200
57,600
5,164,800

To record exchange loss on accounts payable in euros and settlement of

accounts payable in euros at the spot rate of P53.80.

Note the following:

The investment in Pineapple Computers, Inc shares is a non-monetary item that is
carried at fair value as it is classified as equity investment through profit or loss (or
a financial asset FVTPL refer PFRS 9). The investment is revalued and translated at
the rate on the date of revaluation, that is, December 31, 20x4.
The equipment is translated at the spot rate at the date of purchase and, being a
non-monetary item, is carried at cost. It is not adjusted for the change in the
exchange rate at balance sheet date. The accounts payable in euros is a monetary
item and is remeasured using the cu rr ent / closing rate at balance sheet date. The
exchange loss is expensed off to the income statement
Problem VII
1.
May 1

Inventory (or Purchases)

Accounts Payable
Foreign purchase denominated in pesos

8,400

June 20

Accounts Payable
Cash
Settle payable.

8,400

July 1

Accounts Receivable
Sales
Foreign sale denominated in pesos

10,000

August 10

Cash
Accounts Receivable
Collect receivable.

10,000

8,400

8,400

10,000

10,000

2.

May 1

Inventory (or Purchases)

Accounts Payable (FC1)
Foreign purchase denominated in yen:
P8,400 / P.0070 = FC1 1,200,000

June 20

Foreign Currency Transaction Loss

Accounts Payable (FC1)
Revalue foreign currency payable to
peso equivalent value:
P9,000 = FC1 1,200,000 x P.0075 June 20 spot rate
- 8,400 = FC1 1,200,000 x P.0070 May 1 spot rate
P 600 = FC1 1,200,000 x (P.0075 - P.0070)
Accounts Payable (FC1)
Foreign Currency Units (FC1)
Settle payable denominated in FC1.

July 1

Accounts Receivable (FC2)

Sales
Foreign sale denominated in foreign currency 2
(FC 2)
FC3: P10,000 / P.20 = FC2 50,000

August 10

Accounts Receivable (FC2)

Foreign Currency Transaction Gain
Revalue foreign currency receivable
to U.S. dollar equivalent value:
P 11,000 = FC2 50,000 x P.22 Aug. 10 spot rate
- 10,000 = FC2 50,000 x P.20 July 1 spot rate
P 1,000 = FC2 50,000 x (P.22 - P.20)
Foreign Currency Units (FC2)
Accounts Receivable (FC2
Receive FC 2 in settlement of receivable

8,400

8,400

600

600

9,000

9,000

10,000

10,000

1,000

1,000

11,000

11,000

Problem VIII
1. Denominated in FC
RR Imports reports in Philippine pesos:

Direct
Exchange
Rate
2.

12/1/x4

12/31/x4

1/15/x5

Transaction
Date

Balance Sheet
Date

Settlement
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

December 31, 20x4

Accounts Payable (FC)
Foreign Currency Transaction Gain
Revalue foreign currency payable to
equivalent peso value:
P 9,900 = FC 15,000 x P.66 Dec. 31 spot rate
-10,500 = FC 15,000 x P.70 Dec. 1 spot rate
P 600 = FC 15,000 x (P.66 - P.70)

600

January 15, 20x5

Foreign Currency Transaction Loss
Accounts Payable (FC)
Revalue payable to current peso equivalent
P10,200 = FC 15,000 x P.68 Jan. 15, 20x5, value
- 9,900 = FC 15,000 x P.66 Dec. 31, 20x4, value
P 300 = FC 15,000 x (P.68 - P.66)

300

Accounts Payable (FC)

Foreign Currency Units (FC)
P10,200 = FC 15,000 x P.68
Accounts Payable (FC)
(FC 15,000 x P.70)
600
(FC 15,000 x P.66)

AJE 12/31/x4

1/15/x5 Settlement

10,200

(FC 15,000 x P.68)

10,200

300

10,200

12/1/x4

10,500

Bal 12/31/x4
AJE 1/15/x5
Bal 1/15/ x5

9,900
300
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

2.

600

-0-

10,000

Accounts Payable (FC2)

Foreign Currency Transaction Gain
Adjust payable denominated in foreign
currency to current peso equivalent
and recognize exchange gain:
P175,300 = Preadjusted Dec. 31, 20x6, value
- 170,100 = FC2 21,000,000 x P.0081, Dec. 31 spot rate
P 5,200

5,200

Accounts Receivable (FC1)

Foreign Currency Transaction Gain
Adjust receivable denominated in FC1

1,900

10,000

5,200

1,900

to equivalent peso value on

settlement date:
P85,500 = FC1 475,000 x P.180 20x7 collection date value
- 83,600 = FC1 475,000 x P.176 Dec. 31, 20x6, spot rate
P 1,900 = FC1 475,000 x (P.180 - P.176)
Cash
Foreign Currency Units (FC1)
Accounts Receivable (FC1)
Accounts Receivable (P)
Collect all accounts receivable.
3.

164,000
85,500

Accounts Payable (FC2)

Foreign Currency Transaction Gain
Adjust payable to equivalent peso
value on settlement date:
P163,800 = FC2 21,000,000 x P.0078 20x7 payment date value
- 170,100 = FC2 21,000,000 x P.0081 Dec. 31, 20x6, spot rate
P 6,300 = FC2 21,000,000 x (P.0078 - P.0081)
Accounts Payable (P)
Accounts Payable (FC2)
Foreign Currency Units (FC2)
Cash
Payment of all accounts payable.

6,300

86,000
163,800

4.

Transaction gain on FC:

December 31, 20x6
December 31, 20x7
Overall

P10,000
1,900
P11,900

gain
gain
gain

5.

Transaction gain on FC2:

December 31, 20x6
December 31, 20x7
Overall

P 5,200
6,300
P11,500

gain
gain
gain

5.

Overall foreign currency transactions gain:

Gain on FC1 transaction
Gain on FC2 transaction

85,500
164,000

6,300

163,800
86,000

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 40,000 x P.40

LCU 40,000 x (P.40 - P.45)
LCU 20,000 x P1.90
LCU 20,000 x (P1.90 - P1.80)
LCU 30,000 x P.90
LCU 30,000 x (P.90 - P.80)
LCU 2,500,000 x P.0025
LCU 2,500,000 x (P.0025 - P.003)

Multiple Choice Problems

1.

2.

C$1 / P.90 (C$1.11 = P1.00)

P.4895
P.4845

3.

4.

x
x

FC30,000
FC30,000
Gain

P.4845
P.4945

x
x

FC30,000
FC30,000
Loss

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
P120,000
P140,000

=
=

-105,000

P(35,000)
5.

20x4
P14,685
14,535
P 150

P280,000
-240,000
P 40,000

=
=

300,000
15,000

20x5
P14,535
14,835
P (300)

315,000

July 1, 20x4, Peso equivalent value

December 31, 20x4, Peso equivalent value
(LCU 840,000 / P140,000) = LCU 6 / P1
July 1, 20x5, Peso equivalent value
(LCU 840,000 / 8) = P105,000
Foreign currency transaction loss
July 1, 20x5, Peso equivalent value
December 31, 20x4, Peso equivalent value
Foreign currency transaction loss

6. c P4,000
AJE

Accounts Payable (FCU)

(200,000 x P.4875) 12/10/x4
4,000
(200,000 x P.4675) 12/31/x4

Accounts Payable (FCU)

Foreign Exchange Gain

4,000

97,500
93,500

4,000

7. d P27,000 = P6,000 + P20,000 + P1,000

Accounts Payable (FCU)
1/20/x4
AJE

90,000
6,000

3/20/x4
Foreign Exchange Loss
Accounts Payable (FCU)

96,000

6,000

6,000

Notes Payable (FCU)

7/01/x4
AJE
12/31/x4
20,000

Foreign Exchange Loss

Notes Payable (FCU)

Interest expense
Interest Payable (FCU)

10/15/x4
AJE
11/16/x4

20,000

Interest Payable (FCU)

(FCU500,000 x .10 x 1/2 year)
AJE
12/3/x4
25,000

Foreign Exchange Loss

Interest Payable (FCU)
8. c P5,000

500,000
20,000
520,000

25,000
1,000
26,000
25,000

1,000

1,000

Accounts Receivable (FCU)

100,000
5,000
105,000

Settlement

Accounts Receivable (FCU)

Foreign Exchange Gain

11/16/x4
5,000

105,000

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-

X5 AJE Accounts Payable (FCU)

Foreign Exchange Gain
10.

1,000

P9,000 = 300,000 FCUs x (P1.65 - P1.62). The foreign currency transaction gain is
computed using spot rates on the transaction date (November 30, 20x4) and the
balance sheet date (December 31, 20x4). The forward exchange rates are not

used because the transaction was not hedged.

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

Foreign exchange currency gain

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

Foreign exchange currency gain

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

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

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

18. b
1 .65
1.62
P
.03
300,000
P 9,000

19. b
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

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

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

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

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

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

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

21. b
1.20
1.10
P
.10
5,000
P
500

22. d
1. 08
1.10
P
.02
23,000
P
460

23. a
. 85
.90
P
.05
20,000
P 1,000

24. b
. 31
.34
P
.03
100,000
P 3,000

25. a
.265
.262
P .003
100,000
P
300

26. d
.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
P

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

32. b any gain or loss on foreign currency should be considered ordinary.

33. d
1/1: Original forward rate or 60-day forward rate
3/1: Date of expiration of the contract
Foreign exchange currency gain per FC

P
P

.940
.930
.010

Multiplied by: No. of FC

Foreign exchange currency gain

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

Forward Contract/Hedging Instrument:

1/1: Original forward rate or 60-day forward rate
3/1: Date of expiration of the contract
Foreign exchange currency gain per FC
Multiplied by: No. of FC
Foreign exchange currency gain
Net loss

.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

P 1.7241
1.8182
P .0941
10,000
P
941

39. b
Balance sheet date (12/31/20x4)
Date of settlement (1/30/20x5)
Foreign exchange currency loss per FC
Multiplied by: No. of FC
Foreign exchange currency loss

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
Multiplied by: No. of FC
Foreign exchange currency loss

1.25
1.26
P
0.01
2,000,000
P
20,000

42. e in a two-transaction approach, the recognition of foreign exchange gain or loss is

separate from the settlement, therefore, the amount of accounts payable to be settled
should be the spot rate on the settlement date, i.e., P1.20 (P1.20 x 2,000,000 FCs = P2,400,000)
43. a
Balance sheet date (12/31/20x4)
Date of settlement (3/2/20x5)
Foreign exchange currency loss

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

Balance sheet date (12/31/20x3)

Date of settlement (4/2/20x4)
Foreign exchange currency loss

P103,000
105,000
P 2,000

45. d

Theories
1. False
2. False
3. True
4. False
5. True

6.
7.
8.
9.
10,

True
False
True
False
True

11.
12.
13.
14.
15.

True
D
C
C
B

16.
17.
18.
19.
20.

d
d
c
b
a

21.
22.
23.
24.
25.

c
b
a
d
b

26.
27.
28.
29.
30.

d
b
d
a

31.
32.
33.
34.
35.

c
d
d
b
b

36
37.
38.
39.

b
d
c
a