Practice Exercises on Foreign Currency Transactions PDF

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Page 1 of 2ADVANCED FINANCIAL ACCOUNTING 3 (ACYAVA3)Foreign Currency TransactionsProblem 1 – Direct and indirect quotation a. If one Taiwanese dollar can be exchanged for P1, the fraction for computing indirect quotation of exchange rate expressed in Taiwanese currency would be: b. If P51 can be exc...

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ADVANCED FINANCIAL ACCOUNTING 3 (ACYAVA3) Foreign Currency Transactions Problem 1 – Direct and indirect quotation a. If one Taiwanese dollar can be exchanged for P1.025, the fraction for computing indirect quotation of exchange rate expressed in Taiwanese currency would be: b. If P51.50 can be exchange for 1 dollar, the direct and indirect exchange rate quotations are: Problem 2 – Foreign currency sale Too-Go Corp. sold metal crafts to a US firm for $70,000 and pertinent information on exchange conversion rates related to this transaction were as follows: Conversion Rate (Peso to US$) Nov. 4 Receipt of order P27.40 Nov. 22 Date of shipment 27.50 Dec. 31 Balance sheet date 27.60 Jan. 6 Date of collection 27.00 How much should be recorded as sales? Problem 3 – Foreign currency payable Sertech Company has an accounts payable in the amount of 10,000 Bahrain Dinar on its books on October 1, 2020. This account was unpaid at the end of the fiscal year, October 31, 2020. The spot rate for the dinar was: October 1, 2011: 1 Dinar = P131 October 31. 2011: 1 Dinar = P133 On October 31, 2011, Domestic Company should report an accounts payable equal to? Problem 4 – Forex gain/loss (basic) Ah-Lee Co. purchased merchandise for 300,000 francs from a vendor in Belgium on November 30, 2020. Payment in Belgium francs was due on January 30, 2021. The exchange rates to purchase one franc were as follows: Nov. 30,2020 Dec. 31,2020 Spot rate P1.65 P1.62 30-day rate 1.64 1.59 60-day rate 1.63 1.56 In its December 31, 2209, income statement, what amount should Hunt report as foreign exchange gain or loss? Problem 5 – Forex gain/loss (one period) Ball Corp. had the following foreign currency transactions during 2020: • Merchandise was purchased from a foreign supplier on January 20, 2020, for the Philippine peso equivalent of P90,000. The invoice was paid on March 20, 2020, at the Philippine peso equivalent of P96,000. • On July 1, 2020, Ball borrowed the Philippine peso equivalent of P500,000 evidenced by a note that was payable in the lender's local currency on July 1, 2021. On December 31, 2020, the Philippine peso equivalents of the principal amount and accrued interest were P520,000 and P26,000, respectively. Interest on the note is 10% per annum. In Ball's 2020 income statement, what amount should be included as foreign exchange transaction loss?

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Problem 6 – Forex gain/loss (two periods) Peecorp Corporation imports merchandise from foreign companies and exports its own products to other foreign companies. The unadjusted accounts denominated in foreign currencies (FC) at December 31,2020 are as follows: Accounts receivable from the sale of merchandise on December 16 to Seehp Corporation. Billing is for 150,000 foreign currencies and due on January 15, 2021: P103,500 • Accounts payable to Efeni Corporation for merchandise received December 2 and payable on January 20, 2021. Billing is for 275,000 foreign currencies: P195,250 Exchange rates on selected dated are as follows: December 31, 2020 P0.680 January 15, 2021 0.675 January 20, 2021 0.685 •

How much is the foreign exchange gain or loss for the years 2020 and 2021? Problem 7 – Forex gain/loss (two periods) AA On December 26, 2020, the vice-president of marketing of Taho Corp. was given a P6,000 travel advance for a 10-dayirip to Thailand. On that date, the vice-president converted the P6,000 into 12,000 Thailand Baht. During this 10-day trip, the baht steadily weakened against the peso. The exchange rate at December 31, 2020 was 1 baht equals P.48. On January 5,2021, the vice-president returned and submitted to the company cashier 1,100 baht and receipt for 10,900 baht that he had spent. On this date, the exchange rate was 1 baht equals P.42. Of the 10,900 baht spent during the trip, 5,700 baht had been spent by December 31,2020. Requirements: a. The foreign exchange gain or loss on December 31, 2020 amounted to: b. The foreign exchange gain or loss on January 5, 2021, the settlement of remaining travel advance Problem 8 – Forex gain/loss (comprehensive) During July 2020, Prime Corporation had the following transactions with foreign businesses: Billing Exchange Rate Date Nature of Transaction Currency (Direct) Vendor A: 7/1/20 Imported merchandise costing 100,000 rupees from Pakistan wholesaler Rupee P.82 7/10/20 Paid 40% of amount owed .83 7/31/20 Paid remaining amount owed .78 Customer A: 7/15/20 Sold merchandise for 50,000 pound to Syrian wholesaler Pound* P.95 7/20/20 Received 20% payment .90 7/30/20 Received remaining amount owed.. .91 *Syrian pound. Requirements: a. What is the capitalized cost of inventory purchase from the Pakistan wholesaler? b. What is the foreign exchange gain or loss on July 10, 2020 transaction arising from the Pakistan wholesaler? c. What is the foreign exchange gain or loss on July 31, 2020 transaction arising from the Pakistan wholesaler? d. What is the reportable sales amount in the income statement in 2020? e. What is the foreign exchange gain or loss on July 20, 2020 transaction arising from the Syrian wholesaler? f. What is the foreign exchange gain or loss on July 30, 2020 transaction arising from the Syrian wholesaler?

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