Multiple Choice Problems

1. 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?

a. 1.10/1. c. 1/.90.
b. 1/1.10. d. .90/1.

2. DD Inc., a Philippine company bought machine parts from a foreign country on March 1,
20x4 for 30,000 foreign currency units (FCU), when the spot rate for FCU was P.4895.
DD’s year-end was March 31, when the spot rate was P.4895. On April 20, 20x5, DD paid
the liability with 30,000 FCUs at a rate of P.4945. DD’s income statement should report a
foreign exchange gain or the years ended March 31,20x4 and 20x5 of.

20X4 20X5
a. P0 P0
b. P0 P150 loss
c. P150 loss P0
d. P150 gain P300 loss

3. 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. Auto's income statements should report a
foreign exchange gain or loss for the years ended December 31, 20X4 and 20X5 of:

20X4 20X5
a. P0 P0
b. P 100 loss P200 gain
c. P0 P 100 gain
d. P100 gain P100 loss
4. On November 1, 20x4, Denver Company