f'rc- b lem 5.

On De: cem ber :3 1 , 20 1 2 a foreign

031a nce s h eet s t a t e d rn forei gn cur
suL..;1 J1ary in Hongkong submitted the follow!ng
ren c•.
;otal a sset s.
. $SOO C')O
1 OO,OOC
� ot a l L1a b1!1t1e�;
G o m � o n stock
250 000
fletai ned Earni ngs
1 50 000
:
The exc ha n g e rate are :
Curre· nt rate f' 3 4C
histo . 1cal rate J. 1 C
We i g nt ed a ve rag e • I •3 00

,J,ssu�ing . t h e functional currency of tr.e suc:; :;1ar; iS the not the currency of !:he ; •

hype�inflat1onary economy was used ano tr-J<:? retain,!d earnings ·of the subsidiary on Decerrf'Je-f"
3 1 . 200 1 2transl ated to Peso is p 460,000. What amc unt of Cumulative tra n s lation ad1ustment ::
lo be reported in the co ns o lidated balance sheer on C •ecembe r 3 1 20 1 2 ?
a . 2 5 , 000 b. 1 0,000 ::: 50. 000 d. 1 25, 000

PrcU>lem 6.M Company sold merchandis9 tor" 11 . 2 00 rupees t o a customer in India or.
N ove mbe r 02, 2 0 1 2. C oll e cti on in India rupeas was c ue on January 3 1 . 20 1 3. Dec. 3 1 . 2012. to
l1edge this foreign c urre nc y exposure . M C ompa r y entered imo a futures contract to �
1 1 1 .200 rupees to a bank for delivery on januarv 3 1 . 2 0 1 3 . Exchange rates for rupees on
different dates a re a s foll ows :

Nov . 2
"'"" �
31
. I _:\.,
.
Jan. 3 1
Strike price P8 1 . 8 ?B 1 . a P8 1 . 8
Bid spot ra te 81.9 80 1 8 0. 1
Offer spot rate 81.7 8 0. 5 80. 3
30-day futures 82 . 3 ':(> '· 83 . 9
GO-day tutures 31.3 ;)J .> 82. q ··= ·
.
9D-day futures 80. 6 81 6 83.4
1 20-day futures 80. 1 51 4 82. 8

What was the net im pa ct i n M ·company s 11 1 co m e i n 2 0 1 2 a s a result of this hecging

•

act1v1ty?
•

a. P22,240 b P 1 1 1 ,200 c. i ' 3 : . 360 d. P1 33.4401oss

ga in loss qa1 n

Problem 7.0n Nov . 1, 20 1 .2, Cars took d eli ve ry fror.1 US firm of inventory costing US t 00,000.
Payments 1s due on January 30, 2 0 1 3. Concurrenrly C a rs paid P900 cas h to acquire a 90 day
call option for U S 1 G 0.000

::
Nov. 1 , 2 0 1 2 •)ec. 31, 20 1 2 Jan. 30, 20 1 3
::.
Spot rate 1 .2 � .22 1 .23
.,
Strike price 1 .2 ?

FV of call option ? . !. 2 00 ?

What is the net FOREX gair• (Joss) to be recognizeo � y Cars on 0-ec. 3 1 , 20 1 2 should be: ....
a. 700 net toss .: 1 300 net loss
b. I ,300 net gain c.:: 2 000 net gain
• I

Problem 8.0n Nov 2, 20 1 ;: , NICO entered into f1. m .:::c mm1tment ·,uith Japanese firm to acquire
an equipment, delivery and passage of title on Marc. n 3 1 . 2 0 1 2, at a price of 4,375 yen. On me
same date, to hedge against unfavorable changes ir1 exchange- rate of the yen. NICO ente�
into a 1 50 day forwa rd contract with BPI for 4 , 3 7 5 1en Tne relevant exchange rate were as
follows ·

1 1 /2/ 1 2 213 1 1 1 2 313 1 / 1 3

Spot rate 37 :;z 35
Forward rate 40 :13 35

How much 1s the amount debited to t h e equr pm e nt ac::ount o n t h e date of:

ci.200,000 ; 1 1 /2/1 2 --: 1 8 5 , G ·: 0 ;. 1 1 /21 1 2
t). 200.000 , L./3 1 / i 3 d . 1 ?5 . 0C O ; 3/3 1 / 1 3