BCSVillaluz

Foreign Currency Transactions

Problem A:
On September 1, 2022, DSS Company, a Philippine-based company goods from U.S. Corporation for $25,000. The inventory was
shipped and invoiced to DSS Company on December 1, 2022 to be paid on February 1, 2023. DSS’s year end is December 31. DSS did
not engaged in any form of hedging activity.

The following are the spot rates for U.S. Dollars at various times are as follows:
Buying spot rates Selling spot rates
September 1, 2022 P38.90 P40.10
December 1, 2022 40.00 40.30
December 31, 2022 40.60 40.85
February 1, 2023 40.45 40.65

1. How much is the foreign exchange gain or (loss) on December 31, 2022?
A. (6,250) C. (15,000)
B. (13,750) D. (18,750)

2. How much is the outstanding accounts payable as of December 31, 2022?

A. 1,015,000 C. 1,021,250
B. 1,016,250 D. 1,035,000

3. How much is the foreign exchange gain or (loss) on February 1, 2023?

A. (3,750) C. (5,000)
B. 3,750 D. 5,000

4. How much is the net foreign exchange gain or (loss)?

A. 8,750 C. 11,250
B. (8,750) D. (11,250)

Problem B:
On November 1, 2022, Queer Company, a Philippine-based Company received an order from American Company, a U.S. based
company for $50,000. The inventory was shipped by Queer Company and billed the American Company on December 1, 2022. Queer
Company received the customer remittance in full on March 2, 2023. Queer’s year-end is December 31. Queer did not engage in any
form of hedging activity.

The following are the spot rates for U.S. Dollars at various times are as follows:
Buying spot rate Selling spot rate
November 1, 2022 P39.90 P40.10
December 1, 2022 40.00 40.20
December 31, 2022 40.60 40.85
March 2, 2022 40.40 40.70

1. How much is the foreign exchange gain or (loss) to be recognized on December 31, 2022?
A. 30,000 C. 35,000
B. 32,500 D. 37,500

2. How much is the outstanding accounts receivable as of December 31, 2022?

A. 2,030,000 C. 2,060,000
B. 2,042,500 D. 2,075,000

3. How much is the foreign exchange gain or (loss) on March 2, 2023?

A. 7,500 C. 10,000
B. (7,500) D. (10,000)

4. How much is the net foreign exchange gain or (loss)?

A. 20,000 C. 25,000
B. (20,000) D. (25,000)

-END OF HANDOUT-

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____________________________________________________________________________________________________________
Brian Christian S. Villaluz, CPA
CPA Reviewer in:
Advanced Financial Accounting & Reporting (AFAR)
Financial Accounting & Reporting (FAR) Page 1 of 1