Ateneo de Zamboanga University

Accounting 630
Foreign Exchange Accounting: Practice Problems

Problem 1: On November 15, 2015, Manila Company, a Philippine company entered into a foreign currency transaction with a
US company for 3,500 US dollars. The merchandise was shipped and invoiced on December 10, 2015. The buyer paid its
account on January 10, 2016. The spot rates per $1 at different dates are:
November 15, 2015 P49.85
December 10, 2015 48.65
December 31, 2015 45.25
January 10, 2016 46.75

Required: Prepare the journal entries of Manila Company from the transaction date to the settlement date pertaining to this
transaction assuming (1) Manila Company is the buyer and (2) Manila Company is the seller.

Problem 2: On October 1, 2014, Pinoy Company sold goods on account to a Thai Corporation for 9,000 Baht. The date of
delivery is October 27, 2014 and payment is due on January 30, 2015. Exchange rates were as follows:
BID rate OFFER rate
Oct. 01, 2014 P47.50 P49.20
Oct. 27, 2014 48.00 46.00
Dec 31, 2014 44.70 43.00
Jan. 30, 2015 42.00 45.50
How much is the forex gain or loss to be recognized on January 30, 2015?
A. P22,500 gain B. P24,300 loss C. P24,300 gain D. P22,500 loss

Problem 3: A Corporation received a promissory note denominated in foreign currency from the sales made to a Singaporean
customer. The following were the related transactions: (in Singapore Dollars). On December 1, A Corporation sold
merchandise to a Singaporean customer for 60-day, 15% promissory note for $48,000, at a buying rate of $1 to P47.50. On
December 31, the buying spot rate is $1 to P46.85. On January 30, the buying spot rate is $1 to P47.75.

On the settlement date, how much is the forex gain or loss?

A. P43,740 gain B. P31,590 loss C. P31,590 gain D. P43,740 loss

Problem 4: On December 1, 2015, M company acquired goods on account from a Korean Company. The amount of purchase
was 370,000 Korean won. M will settle the account on January 2, 2016. On December 1, the spot rate was 25 Korean won for
one Philippine peso. Also on December 1, M entered into a forward contract to purchase 370,000 Korean won on January 2,
2016 at a forward rate of 50 Korean won for one Philippine peso. The spot rate and forward rate for 1 PhP on December 31,
2015 is 40 Korean won.

How much is the foreign exchange gain or loss on hedging instrument-forward contract?
A. P5,550 gain B. P5,550 loss C. P1,850 gain D. P1.850 loss

Problem 5: The following data applies to Davao Company’s sale of 8,250 foreign currency units under a forward contract
dated November 1, 2015, for delivery on January 31, 2016:
11/1/15 12/31/16
Spot rates P55 P53
30-day forward rate 51 50
90-day forward rate 48 45
What amount of loss should Davao report from this forward contract on December 31, 2015?
A. P41,250 B. P16,500 C. P24,750 D. P0

Problem 6: Given the following information (for $1):

Buying Spot Rate Selling Spot
Rate
Transaction Date P44 P46
Balance Sheet Date 49 50
Settlement Date 51 54

Forward Rates
120-day futures 90-day futures 60-day futures 30-day
futures
Transaction Date P44 P46 P45 P47
Balance Sheet Date 43 47 49 51
Settlement Date 46 49 50 53

On November 1, 2015, B Company sold merchandise to US Company. Delivery was made on December 1 2015. The price of
$7,450 is to be collected on February 28, 2016. To hedge this foreign currency exposure, B Company entered into a forward
contract for on February 28, 2016. How much is the forex gain (loss) on the forward contract on the balance sheet date?

Required: Prepare the journal entries for the aforementioned transactions from the transaction date to the settlement date.