BUSCMB - 3RD FQ

How much is the translated profit or loss?

¥9M

¥7M

¥6M

¥12M
22,

The accumulated translation differences from a foreign operation

is reclassified within equity when the foreign operation is derecognized.

is reclassified to profit or loss when the foreign operation is derecognized.

remains within equity but cannot be reclassified from one equity account to another
equity account

none of the these

When translating the financial statements of a foreign operation, the resulting

exchange differences after translating all assets, liabilities, equity, income and
expenses consists of all of the following, except
Translation of opening net assets using opening and closing rates.

Translation of goodwill using opening and closing rates.

Translation of profit using average and closing rates.

Translation of ending net assets using opening and closing rates.

44,

You are an auditor. ABC Philippines Co., your client, is not sure on what to
disclose in its financial statements as its functional currency. Relevant information
follows: ABC Philippines Co. is a branch of ABC U.S. Co. ABC Philippines operates
in a Philippine Economic Zone Authority (PEZA) Special Economic Zone. ABC
Philippines is engaged in the apparel business. All of its raw materials are
imported from the main office in the U.S. and all of its finished products are
exported directly to U.S. customers. The U.S. customers remit payments to the
U.S. main office. The U.S. main office will then provide the Philippine branch its
working capital needs. None of ABC Philippines Co.s’ finished products are sold in
the Philippines. The raw materials imported and finished goods exported are
denominated in U.S. dollars. ABC Philippines Co. is required to file audited
financial statements with the Philippine Securities and Exchange Commission
(SEC) and the Bureau of Internal Revenue (BIR). What is the presentation currency
for the financial statements to be filed with the said government agencies?
Philippine peso

U.S. dollar

Philippine peso or US dollar

none of these
It refers to an obligation to deliver a fixed or determinable number of units of
currency.
monetary item

non-monetary item

financial instrument

monetary liability

These are those which do not give rise to a right to receive (or an obligation to
deliver) a fixed or determinable amount of money.
Monetary items

Non-monetary items

Financial items

Non-financial items

When translating the financial statements of a foreign operation, which of the

following translation procedures is inappropriate
Assets, liabilities, and equity, including any goodwill and FVAs, are translated at the
closing rate.

Income and expenses are translated at the spot exchange rates. For practical reasons,
income and expenses may be translated at the average rate.

All resulting exchange differences shall be recognized in profit or loss.

All resulting exchange differences shall be recognized in other comprehensive income .

What is the capitalized cost of inventory purchased from the Pakistan wholesaler?
P -0-

P78,000

P82,000

P83,000

On September 1, 2019, Rosan Corporation received an order for equipment from

a foreign customer for 300,000 local currency units (LCU) when the Philippine
peso equivalent was P96,000. Rosan shipped the equipment on October 15, 2019,
and billed the customer for 300,000 LCU when the Philippine peso equivalent was
P100,000. Rosan received the customer’s remittance in full on November 16,
2019, and sold the 300,000 LCU for P105,000. In its income statement for the year
ended December 31, 2019, Rosa should report a foreign exchange transaction
gain of
P -0-

P4,000

P5,000

P9,000
Bon-Bon Corporation had the following foreign currency transactions during
2019: • Merchandise was purchased from a foreign supplier on January 20, 2019
for the Philippine peso equivalent of P90,000. The invoice was paid on March 20,
2019, at the Philippine peso equivalent of P96,000. • On July 1, 2019, Bon-Bon
borrowed from foreign corporation with a Philippine peso equivalent of P500,000
evidenced by a note that was payable in the lender’s local currency on July 1,
2020. On December 31, 2019, 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 Bon-Bon’s 2019 income statement, what amount
should be included as foreign exchange loss?Required to answer. Single choice.
P -0-

P6,000

P21,000

P27,000

What is the foreign exchange gain or loss on July 31, 2019 transaction arising
from the Pakistan wholesaler?
P4,000 gain

P4,000 loss

P2,400 loss

P2,400 gain

Ashar, a Philippine Corporation, bought inventory items from a foreign supplier in

US on November 5, 2019 for US $100,000, when the spot rate was P41.00. At
Ashar’s December 31, 2019, year-end, the spot rate was P40.50. On January 15,
2020, Ashar bought US $100,000 at the spot rate of P40.90 and paid the invoice.
How much should Ashar report in its income statements for 2019 and 2020 as
foreign exchange transaction gain or (loss)? 2019 2020
P(50,000) P40,000

50,000 (40,000)

P–0- P10,000

10,000 -0–

How much is the translated total equity?

¥40M

¥36M

¥20M

¥18M

You are an auditor. ABC Philippines Co., your client, is not sure on what to
disclose in its financial statements as its functional currency. Relevant information
follows: ABC Philippines Co. is a branch of ABC U.S. Co. ABC Philippines operates
in a Philippine Economic Zone Authority (PEZA) Special Economic Zone. ABC
Philippines is engaged in the apparel business. All of its raw materials are
imported from the main office in the U.S. and all of its finished products are
exported directly to U.S. customers. The U.S. customers remit payments to the
U.S. main office. The U.S. main office will then provide the Philippine branch its
working capital needs. None of ABC Philippines Co.s’ finished products are sold in
the Philippines. The raw materials imported and finished goods exported are
denominated in U.S. dollars. What is ABC Philippines Co.’s functional currency?
Philippine peso

U.S. dollar

Philippine peso or US dollar

none of these

When a foreign currency transaction occurred in one period and settled in

another period,
the exchange differences between the transaction date and the date of settlement is
recognized in the period of settlement.

exchange differences between the transaction date and the end of reporting period is
recognized in the period of transaction.

exchange differences between the end of the previous reporting period and the date of
settlement is recognized in the period of settlement.

the exchange differences between the transaction date and the date of settlement
is recognized in the period of settlement and exchange differences between the
end of the previous reporting period and the date of settlement is recognized in
the period of settlement.

What is the foreign exchange gain or loss on July 30, 2019 transaction arising
from the Syrian wholesaler?
P1,600 loss

P1,600 gain

P2,000 gain

P2,000 loss

What is the foreign exchange gain or loss on July 20, 2019 transaction arising
from the Syrian wholesaler?
P500 gain

P500 loss

P2,500 gain

P2,500 loss

On December 1, 2019, you imported a machine from a foreign supplier for

$100,000, due for settlement on January 6, 2020. Your functional currency is the
Philippine peso. When preparing the December 31, 2019 statement of financial
position, which of the following will you translate to the closing rate?
machine

accounts payable

machine and accounts payable

none of these

What is the foreign exchange gain or loss on July 10, 2019 transaction arising
from the Pakistan wholesaler?
P1,000 loss

P1,000 gain

P400 gain

P400 loss

For a Philippine entity, which of the following quotations for exchange rates is
correct? Direct quotation Indirect quotation
₱1:$0.022 ₱45:$1

₱45:$65 ₱65:$45

₱40:$1 ₱1:$0.025

₱45:$1 ¥.002:₱40

On July 1, 2019, VIR Company lent P120,000 to a foreign supplier, evidenced by

an interest-bearing note due on July 1, 2020. The note is denominated in the
currency of the borrower and was equivalent to 840,000 local currency units
(LCU) on the loan date. The note principal was repaid to VIR on the July 1, 2020
due date when the exchange rate was 8 LCU to P1. In its income statement for
the year ended, December 31, 2020, what amount should VIR include as a foreign
currency transaction gain or loss?
P -0-

P15,000 loss

P15,000 gain

P35,000 loss

Once determined, the functional currency

Is changed every year depending on the functional currency the entity wishes to use

Is permanent and can never be changed unless the entity undergoes reorganization

Is not changed unless there is a change in those underlying transactions, events

and conditions

Is changed only when the entity chooses to the change its accounting policy. After the
change in accounting policy, previous financial statements are restated so that the
current year and comparative financial statements are presented using the uniform
currency

It is an entity that is a subsidiary, associate, joint venture or branch of a reporting

entity, the activities of which are based or conducted in a country or currency
other than those of the reporting entity.
foreign operation

foreign transaction

foreigner

alien operation

When an entity is operating under a hyperinflationary economy, its financial

statements
are first consolidated in accordance with PFRS 10, then restated in accordance with PAS
29, and finally translated to the presentation currency in accordance with PAS 21

are first translated to the presentation currency in accordance with PAS 21 before they
are restated in accordance with PAS 29.

are first restated in accordance with PAS 29 before they are translated to the
presentation currency in accordance with PAS 21.

are first prepared using PAS 1, translated using PAS 21, consolidated using PFRS 10,
then restated using PAS 29.

The accumulated translation differences from a foreign operation

Is reclassified within equity when the foreign operation is derecognized

Is reclassified to profit or loss when the foreign operation is derecognized

Remains within equity but cannot be reclassified from one equity account to another
equity account

None of these

How much is the translated total assets?

¥40M

¥36M

¥20M

¥18M

When a foreign currency transaction occurred and settled in the same period,
all the exchange difference is recognized in that period.

all the exchange difference is recognized in the next period.

all the exchange difference is recognized in the previous period.

none of these

What is the reportable sales amount in the income statement in 2019?

P38,000

P45,000

P45,500

P47,500
2929,

On December 1, 2019, you imported a machine from a foreign supplier for

$100,000, due for settlement on January 6, 2020. Your functional currency is the
Philippine peso. The relevant exchange rates are as follows: Dec. 1, 2019 Dec. 31,
2019 Jan. 6, 2020 ₱50:$1 ₱52:$1 ₱47:$1 How much foreign exchange gain (loss)
will you recognize on December 31, 2019?
200,000

(200,000)

100,000

(100,000)

When several exchange rates are available, the rate used is

the selling rate

the buying rate

either selling rate or buying rate as a matter of accounting policy choice

that at which the future cash flows represented by the transaction or balance
could have been settled if those cash flows had; occurred at the measurement date