Professional Documents
Culture Documents
2 a
21.3 c
21.4 a
21.5 a
21.6 c
21.7 d
21.8 b
21.9 a
21.10 a
20-4: a
Average rate for the year is used in translating depreciation expense because this is more
reasonable estimation than the rate when the related asset was acquired (P4.80).
CHAPTER 21
21-1 b
21.11 a
21.12 a
21.13 b
21.14 b
21.15 a
21.16 c
21.17 a
123
21.18 a
21.19 c
21.20 d
21.21 a
21.22 c
21.23 a
21.24 a
21.25 c
21.26 d
21.27 b
21.28 a
21.29 a
20-4: a
Average rate for the year is used in translating depreciation expense because this is more
reasonable estimation than the rate when the related asset was acquired (P4.80).
CHAPTER 21
21-1 b
21.30 a
21.31 a
21.32 b
124
21.33 b
21.34 a
21.35 c
21.36 a
21.37 a
21.38 c
21.39 d
21.40 a
21.41 c
21.42 a
21.43 a
21.44 c
21.45 d
21.46 b
21.47 a
21.48 a
20-4: a
Average rate for the year is used in translating depreciation expense because this is more
reasonable estimation than the rate when the related asset was acquired (P4.80).
CHAPTER 21
21-1 b
125
21.49 a
21.50 a
21.51 b
21.52 b
21.53 a
21.54 c
21.55 a
21.56 a
21.57 c
21.58 d
18-4: c
CI – Saw P100,000
Unrealized loss-Upstream 12,000
Realized loss ((P12,000 / 5) x 6/12 ( 1,200)
Adjusted CI – Saw P110,800
18-5: c
18-1: a
Accumulated depreciation:
Time of sale P250,000
Current depreciation based on
126
Original cost (P500,000/10 years 50,000 P300,000
18-2: b
CI – Sol P100,000
Unrealized gain on sale of computer, Dec. 31 ( 30,000)
Adjusted CI P 70,000
NCI proportionate share 30%
NCI inCI of subsidiary P 21,000
18-3: b
2012 2013
CI from own operations – Prime P200,000 P250,000
Unrealized gain – Downstream (30,000) __-
Adjusted net income – Prime P170,000 P250,000
Second Company CI 100,000 150,000
Consolidated CI P270,000 P400,000
18-4: c
CI – Saw P100,000
Unrealized loss-Upstream 12,000
Realized loss ((P12,000 / 5) x 6/12 ( 1,200)
Adjusted CI – Saw P110,800
18-4: c
CI – Saw P100,000
Unrealized loss-Upstream 12,000
Realized loss ((P12,000 / 5) x 6/12 ( 1,200)
Adjusted CI – Saw P110,800
18-5: c
18-1: a
127
Equipment – at original cost P500,000
Accumulated depreciation:
Time of sale P250,000
Current depreciation based on
Original cost (P500,000/10 years 50,000 P300,000
18-2: b
CI – Sol P100,000
Unrealized gain on sale of computer, Dec. 31 ( 30,000)
Adjusted CI P 70,000
NCI proportionate share 30%
NCI inCI of subsidiary P 21,000
18-3: b
2012 2013
CI from own operations – Prime P200,000 P250,000
Unrealized gain – Downstream (30,000) __-
Adjusted net income – Prime P170,000 P250,000
Second Company CI 100,000 150,000
Consolidated CI P270,000 P400,000
18-4: c
CI – Saw P100,000
Unrealized loss-Upstream 12,000
Realized loss ((P12,000 / 5) x 6/12 ( 1,200)
Adjusted CI – Saw P110,800
18-4: c
CI – Saw P100,000
Unrealized loss-Upstream 12,000
Realized loss ((P12,000 / 5) x 6/12 ( 1,200)
Adjusted CI – Saw P110,800
18-5: c
128
MULTIPLE CHOICES – COMPUTATIONAL
18-1: a
Accumulated depreciation:
Time of sale P250,000
Current depreciation based on
Original cost (P500,000/10 years 50,000 P300,000
18-2: b
CI – Sol P100,000
Unrealized gain on sale of computer, Dec. 31 ( 30,000)
Adjusted CI P 70,000
NCI proportionate share 30%
NCI inCI of subsidiary P 21,000
18-3: b
2012 2013
CI from own operations – Prime P200,000 P250,000
Unrealized gain – Downstream (30,000) __-
Adjusted net income – Prime P170,000 P250,000
Second Company CI 100,000 150,000
Consolidated CI P270,000 P400,000
18-4: c
CI – Saw P100,000
21.59 a
21.60 c
21.61 d
21.62 b
21.63 b
21.64 b
21.65 a
21.66 a
129
Excess of income over expenses P 200
Depreciation 70
Increase in due from national government agencies ( 10)
Increase in prepaid rent ( 15)
Increase in accounts payable 30
Total P450,000
20-4: a
Average rate for the year is used in translating depreciation expense because this is more
reasonable estimation than the rate when the related asset was acquired (P4.80).
CHAPTER 21
21-1 b
21.67 a
21.68 a
21.69 b
21.70 b
21.71 a
21.72 c
21.73 a
21.74 a
21.75 c
21.76 d
21.77 b
21.78 b
21.79 b
21.80 a
130
21.81 a
21.82 a
20-4: a
Average rate for the year is used in translating depreciation expense because this is more
reasonable estimation than the rate when the related asset was acquired (P4.80).
CHAPTER 21
21-1 b
21.83 a
21.84 a
21.85 b
21.86 b
21.87 a
21.88 c
21.89 a
21.90 a
21.91 c
21.92 d
21.93 b
Attributable to parent P1,160,000
131
16-8: a
18-1: a
Accumulated depreciation:
Time of sale P250,000
Current depreciation based on
Original cost (P500,000/10 years 50,000 P300,000
18-2: b
CI – Sol P100,000
Unrealized gain on sale of computer, Dec. 31 ( 30,000)
Adjusted CI P 70,000
NCI proportionate share 30%
NCI inCI of subsidiary P 21,000
18-3: b
2012 2013
CI from own operations – Prime P200,000 P250,000
Unrealized gain – Downstream (30,000) __-
Adjusted net income – Prime P170,000 P250,000
Second Company CI 100,000 150,000
Consolidated CI P270,000 P400,000
18-4: c
CI – Saw P100,000
Unrealized loss-Upstream 12,000
Realized loss ((P12,000 / 5) x 6/12 ( 1,200)
Adjusted CI – Saw P110,800
18-5: c
Accumulated depreciation:
132
Attributable to parent P1,160,000
16-8: a
18-1: a
Accumulated depreciation:
Time of sale P250,000
Current depreciation based on
Original cost (P500,000/10 years 50,000 P300,000
18-2: b
CI – Sol P100,000
Unrealized gain on sale of computer, Dec. 31 ( 30,000)
Adjusted CI P 70,000
NCI proportionate share 30%
NCI inCI of subsidiary P 21,000
18-3: b
2012 2013
CI from own operations – Prime P200,000 P250,000
Unrealized gain – Downstream (30,000) __-
Adjusted net income – Prime P170,000 P250,000
Second Company CI 100,000 150,000
Consolidated CI P270,000 P400,000
18-4: c
CI – Saw P100,000
Unrealized loss-Upstream 12,000
Realized loss ((P12,000 / 5) x 6/12 ( 1,200)
Adjusted CI – Saw P110,800
18-5: c
133
Accumulated depreciation:
Attributable to parent P1,160,000
16-8: a
Accumulated depreciation:
CHAPTER 19
19-1: d.
19-6: b.
19-7: a.
2012
Forex rate, 11/5/12 P 0.4295
Forex rate, 12/31/12 0.4245
Decrease in forex rate P 0.0050
Payable in foreign currency 50,000
Forex gain P 250
2013
Forex rate, 12/31/12 P 0.4245
Forex rate, 1/15/13 0.4345
Decrease in forex rate P 0.0100
Payable in foreign currency 50,000
Forex loss P (500)
19-10: b
134
19-11: d. forex gain (loss) on purchase commitments is based on the changes in the forward rates.
On December 31, 2013, no changes in forward rates occurred, so no forex gains (losses) are to be
recognized on December 31, 2013 under both transactions.
19-12: b.
19-13: d.
19-14: b.
19-15: a.
19-16: a. The forex gain or loss (changes in forward rates) is offset by gain or loss in firm
commitment to purchase machinery. The hedge was perfect.
19-17: 1. a
June 30: 400,000 FC x (P1.381 – P1.370) P(4,400)
July 31: 400,000 FC x (P1.385 – P1.381) (1,600)
Net forex loss P (6,000)
2. c
June 30: (P2,600 – P1,400) P1,200
July 31: [(P1.385 – P1.375) x 400,000FC] – P2,600 1,400
Net gain on option P2,600
Note that the option has expired and, therefore, there is no time value.
135
3. a
Down payment (50,000 FC x P1.350) P 67,500
Balance due (400,000 FC x P1.370) 548,000
Cost of machinery P615,500
19-18: 1. a
FCA FCB
Number of FC in commitment:
P549,600/P1,200 458,000
P297,975/P0.685 435,000
Change in spot rate from commitment date to
Transaction date:
P1.200 – P1.160 P 0.04
P0.685 – P0.692 P 0.007
Gain (loss) on commitment:
458,000 FCA x P0.04 P(18,320)
435,000 FCB x P0.007 P 3,045
2. a
FCA FCB
Receivables at spot rate at transaction date:
458,000 FCA x P1.160 P531,280
435,000 FCB x P0.692 P301,020
Receivables at spot rate at settlement date:
458,000 FCA x P1.170 535,860
435,000 FCB x P0.720 313,200
Exchange gain (loss): 4,580 12,180
19-19: 1. a
2. d
Computations: Forward
Contract Option
Prior to transaction date:
Gain (loss) on commitment [100,000 x (P1.250 – P1.320)] P (7,000) P (7,000)
Gain (loss) on hedging instrument:
Forward contract [100,000 x (P1.320 – P1.250)] 7,000
Option [100,000 x (P1.320 spot 0 P1.250 strike)] 7,000
Gain (loss) excluded from hedge effectiveness:
Forward contract [100,000 x P1.270 – P1.250)] (2,000)
Option (premium paid is all time value) - (1,200)
Effect on earnings prior to transaction date P (2,000) P (2,100)
19-20: a
12/01/13: A$70,000/P42,000 = 1.667 A$ to P1.00
12/31/13: A$70,000/P41,000 = 1.679 A$ to P1.00
19-22: a, The balance will not change, because it is denominated in Philippine peso.
19-23: a
P82,000/KRW 400,000 = P.205
136
The P82,000 is the amount of the peso payable to bank. This amount is computed using the
forward rate.
Problems
Problem 19-1
Foreign Foreign
Currency Currency
Accounts Accounts Transactions Transactions
Receivable Payable Exchange Loss Exchange Gain
Problem 19-2
137
Problem 19-2, continued:
Problem 19-3
a. No net exposure between November 1 and March 1. Michael, Inc. has hedged its foreign currency
purchase commitment with a forward contract to receive an equal number of foreign currency
units.
138
Problem 19-3, continued:
December 31: Firm commitment for merchandise 4,800
Forex gain 4,800
To record increase in fair value of the
Purchase commitment, and resultant
gain or the decrease in the forward rate.
Problem 19-4
139
Problem 19-4, continued:
August 1: Accounts payable 480,000
Forex loss (¥ 1,000,000 x P.03) 30,000
Cash (¥ 1,000,000 x P.51) 510,000
To record settlement.
Problem 19-5
Cash 1,240,000
Forward contract receivable 1,240,000
To record collection for forward contract.
140
Problem 19-6
Problem 19-7
Contract 1:
141
Forward contract payable 160,000
Cash 160,000
To record payment of forward contract.
Problem 19-8
142
Problem 19-8, continued:
June 20: Inventory- Used Equipment 21,960
Cash 21,960
To record reconditioning the equipment
(30,000 FC x P0.732)
143
Problem 19-8, continued:
Schedule 1
June 15 June 30
Number of FC 400,000 400,000
Forward rate remaining time – 1 FC P0.731 P0.737
Problem 19-9
Cash 164,000
Forward contract receivable 164,000
To record receipt of Phil. Pesos in settlement of the
forward contract receivable.
144
Problem 19-10
Current assets:
Forward contract receivable (Siam hedge: in Phil. pesos) P 168,000
Forward contract receivable (Indon hedge: 10,000,000 x P.0077) 77,000
Forward contract receivable (Speculation in Yen: 200,000 x P.670) 134,000
Change in value of firm commitment 1,000
Current liabilities:
Accounts payable (Indon account: 10,000,000 x P.0077) P 77,000
Forward contract payable (Siam hedge: 100,000 Baht x P1.690) 169,000
Forward contract payable (Speculation in Yen: payable in Phil. pesos) 130,000
Problem 19-11
a. Entry to record the purchase of the call options on November 30, 2012:
145
Record the decrease in the time value
of the options to current earnings.
Cash 30,000
Call options 30,000
Record the sale of the call options.
d. June 1, 2013, entries to record the sale of the oil and other entries:
Cash 340,000
Sales 340,000
Record the sale of 10,000 barrels
of oil at P34 per barrel
OCI 30,000
Cost of goods sold 30,000
Reclassify into earnings the other
comprehensive income from the
cash flow hedge.
146
147