,..

.·

Problem 9. On
Novembe r 1 . Naga Company entered into a firm commitme
nt to acquire- ·a
.
be on =ebruary at the price of $ 1 2 ,000
machinery Delivery and passage of title would 28, 20 1 3
Singapore dollars. On the same date, to hedge agai11st unfavora ble changes .11n the exchange
S1flgapor e dollars .
rate. S entered into a 1 20-day · forward contract with China bank for $ 1 2,000 '
Exchange rate were as follows:

Spot Rate • ForvVa rd Rate

Nov 01 . 20 1 2 P36.25 P34.30
Dec. 3 1 , 2 0 1 2 37.40 36.70
Feb. 28, 20 1 3 39.50 • 39.50

How much is the forex gain or Joss recognized by the S company on the firm commitment ..
on December31, 2012?
)
,.
.· A P13,800 gain
E. P28,800 loss
C.
"
P1 3,800 loss
D. P28,800 gain

I Problem 1 0.011 October 2, .20 1 3 , KO Inc. ordered a custom built d e li very truck from a Japannse
firm. The purchase order is non-cancellable. The pU"" chase price 1s 1 million yen with delivery
a nd payment to be made 0n March 3 1 , io·14. On October 2, 201 3, KO Inc. entered int<> .a
brward contract to buy 1 r 1 illion yen on Ma rc h 3 1 , 2014 for P0.57. On March 3 1 , 2 0 1 4 , the
customer build delivery truck was delivered.

1 0/02.' 1 3 · ; 2/3 1 / 1 :; 3/3 1 / 1 '1

Spot rate P0.50 P0. 9 6 • I P0.57
For.Yard rate 0.53 0.58 0.57

As a f;:iir value hedge, the December 3 1 , 20.1 3 p rofit and loss statement forex gain or loss on the
hedging instrument amounted to?

A P50,000 loss B. P50,000 gain C P60, 000 loss D . P60,000 gain

the Dec e mbe r 3 1 , 201 3 profit e nd loss statement forex gain or loss-on
°
As a cash flow hedge,
tne hedging instrument amounted to?

A P50,000 P/L gain B. P50,000 OCI gain C P60,000 OCI los s D . P60,000 P/Lgain

Problem 1 1 .Clippers Company operates a branch operation in a foreign country. Although this
branch deals i n foreign cummcy (FC), the peso is viewed as its functional currency. Thus, a re­
measurement !S necessary is necessary to oroduce financial information for external reporti�g
purposes. The branch began the year witn 1 00,000 FCs in cash and no other assets or
liabilities. However, the bra11ch immediately _used 60, )00 FCs to acquire equipment. On May 1,
ii p u rch ase d inventory cost111g 30,000 FCs ror cash < ind 1t sold o n July 1 for 50,000 FCs cash.
Tile branch transferred 1 0,000 FCs to the parent on ( •ctober 1 ;;ind recorded depreciation on the
.;: qu1pment of 6 , 000 FCs for tile year. C u rrency ex:11a.1�e rat�s !or I F!; fP.lj�ws.

Janu�ry 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P0. 1 6 = 1 FC
•

May 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . P0. 1 8

L . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 0 . 20 ·
.iuly
•
Octob er 1 . . .. .. . . . . . . . . . . . . . . . . . P0 . 2 1
Dece mber 1 . . . .
. . . . . . . . . . . . . . . . . . . . . . P0 . 22
Aver age for the year. . . . .. .. . . . . . . PO. 1 9

or loss to be r·3Cognized i n the comb ined i ncom e

What is the forex re-me asure ment gain
s ta tem en t?
B. P2,400 C P2,700 D. 3,000
A. P2, 1 00