P R A C T I C E S E T

TRANSLATION TO THE PRESENTATION – FUNCTIONAL CURRENCY IS NOT THE CURRENCY OF

A HYPERINFLATIONARY ECONOMY
(CURRENT RATE METHOD/NET INVESTMENT METHOD/CLOSING RATE METHOD

Papaya Corp, a Philippine owned corporation had 100% ownership interest of Santol Company based in
Vancouver, Canada. Santol’s trial balance at Dec 31, 2019 in Canadian Dollars is as follows:
Debits Credits
Cash $30,000.00
Accounts Receivable 18,000.00
Land and Buildings - net 100,000.00
Accounts Payable 18,000.00
Bonds Payable 45,000.00
Capital Stock 50,000.00
Retained Earnings, Jan 1 30,000.00
Dividends 5,000.00
Sales 75,000.00
Cost of Sales and Expenses 65,000.00
Totals 218,000.00 218,000.00
In addition, the following information was available:
1. Transactions involving land and buildings, bonds payable, and capital stock all occurred in 2015.
2. Dividends were declared on March 15, 2019 and paid on Oct 15, 2019
3. The relevant exchange rates for every 1 Canadian dollar were as follows:
2015 P35.00
1-Jan-19 41.00
31-Jan-19 42.00
15-Mar-19 46.00
15-Oct-19 48.00
Average for 2015 - 2019 48.50
Average for 2019 47.00
31-Dec-19 49.00
Required: Translate the FS of Canadian Subsidiary into Presentation Currency if the functional currency
is not the currency of a hyperinflationary economy assuming that:
a. Sales, purchases and all operating expenses are assumed to have occurred evenly throughout
the year.
b. The peso balance of Retained Earnings on Dec 31, 20018, was P1,230,000.
Income Statement and Retained Earnings Dollars ($) Exchange Rate Pesos (P)
Sales: 75,000.00 ? ?
Less: Cost of Sales and Expenses 65,000.00 ? ?
Net Income 10,000.00 ? ?
Add: RE, Jan 1 30,000.00 given 1,230,000.00
Total 40,000.00 ?
Less: Dividends 5,000.00 ? ?
RE, Dec 31 35,000.00 ?
Balance Sheet
Cash 30,000.00 ? ?
Accounts Receivable 18,000.00 ? ?
Land and Buildings 100,000.00 ? ?
Total Assets 148,000.00 ? ?
 Accounts Payable 18,000.00 ? ?
Bonds Payable 45,000.00 ? ?
Capital Stock 50,000.00 ? ?
RE, Dec 31 35,000.00 ?
Sub-total 148,000.00 ?
Cumulative Translation Gain/Loss 0 Balancing Figure ?
Total Liabilities and Shareholders' Equity 148,000.00 ?
Required: Complete the balance sheet

HYPERINFLATIONARY ECONOMY

P-Noy Company operates in a hyperinflationary economy. Its balance sheet at Dec 31, 2019, follows:
Baht ('000)
PPE 900
Inventory 2,700
Cash 350
Share Capital (issued 2015) 400
Retained Earnings 2,350
Noncurrent liabilities 500
Current Liabilities 700
The general price index had moved in this way:
31-Dec
2015 100
2016 130
2017 150
2018 240
2019 300
The property, plant and equipment were purchased on Dec 31, 2017, and there is a six months inventory
held. The non-current liabilities were a loan raised on March 31, 2019

Determine the following:

1. The total assets after adjusting for hyperinflation should be: (‘000’s)
a. 1,550 c. 5,850
b. 5,150 d. 11,850
2. The Retained Earnings on Dec 31, 2019 (‘000)
a. 2,350 c. 2,937
b. 2,750 d. 7,050
3. The Retained Earnings on Dec 31, 2019 (in ‘000’s) assuming the following rates:
31-Dec
2015 P 1.20
2016 1.24
2017 1.27
2018 1.50
2019 1.75
a. P4,812.50 c. P3,525.00
b. P4,125.00 d. P2,750.00
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