QUIZ 3 HOBR, FOREX, PROCESS, JA c.

Home office credit memo representing a discount on merchandise for P1,200 was not
Name: Mariel Princess B. Tabilangon Section: AC1551 Date: recorded by the branch.
10/23/19 d. Advertising expense of P1,225 charged by the home office was taken up twice by the
Problem 1: Plethora-Large Corporation operates a number of branches in the provinces. On branch.
December 31, 2019, its Davao branch showed a Home Office Account balance of P164,100 e. Freight charge on merchandise made by the home office for P1,125 was recorded in the
and the home office books showed an Investment in Davao Branch account balance of branch books as P1,215.
P153,300. The following information may help in reconciling both accounts: f. An equipment costing the home office P2,500 was picked up by the branch as P250.

1. A P72,000 shipment, charged by Home Office to Davao Branch, was actually sent to and Compute the balance of unadjusted balance of the home office account as of December 31,
retained by Cebu Branch. 2008.
2. A P90,000 shipment, intended and charged to Aklan Branch was shipped to Davao 387,870
Branch and retained by the latter.
3. A P12,000 emergency cash transfer from Cebu Branch was not taken up in the Home Problem 4: A reconciliation of the Desire Branch account of Aspiration Company and the
Office books. Home Office account carried in the branch’s books shows the following discrepancies at
4. Home office collects a Davao Branch accounts receivable of P21,600 and fails to notify the December 31, 2019:
branch.
5. Home office was charged for P7,200 for merchandise returned by Davao Branch on 1. A credit memo from the home office for P900 was taken by the branch as P1,080.
December 30. The merchandise is in transit. 2. A charge by the branch of P1,650 for an advance taken by the president when he visited
6. Home office erroneously recorded Davao Branch’s net income for 2019 at P97,650. The the branch has not yet been recorded by the home office.
branch reported a net income of P76,050. 3. The branch has not taken up P2,700 covered by a debit memo from the home office as
share in advertising expenses.
What is the adjusted balances of the Home Office and Davao Branch reciprocal accounts on
December 31, 2019? 130,500 The investment in Desire Branch account in the home office books had a debit balance of
P129,000 at December 31, 2019. The reciprocal accounts were in agreement at the beginning
Problem 2: K maintains a branch in Davao City. Selected account balances taken from the of the year.
books of K an its Davao branch as of December 31, 2020 are as follows:
What is the unadjusted balance of the Home Office account in the branch ’s books at
Home Office Branch
December 31, 2019? 124,470
Branch inventory allowance 533,250 - What is the adjusted balance? 127,350
Inventory December 31, 2020 378,000 279,450
Problem 5: Model-Paragon has two merchandise outlets, its Home Office in Manila and its
Inventory January 1, 2020 324,000 216,000 Cebu City branch. For control purposes, all purchases are made by the Home Office and
Purchases 4,050,000 810,000 shipped to the Cebu City Branch at cost plus 10%. On January 1, 2019 the inventories of the
Home Office in Manila and the Cebu City Branch are P40,800 and P11,880 respectively.
Sales 3,105,000 4,765,500
During 2019 the Home Office purchased merchandise costing P120,000 and shipped 40% of
Shipments from home office - 2,531,250 it to the Cebu City Branch. At December 31, 2019, the following journal entry to prepare the
Shipments to branch 2,025,000 - books for the next accounting period was prepared by the branch:

P117,450 of the branch’s ending inventory came from purchases from suppliers other than Sales 96,000
the Home Office. As far is the home office is concerned, the COGS of the branch is: 2,776,950 Inventory, December 31 14,520
Inventory, January 1 11,880
Problem 3: Phoenix Trading Co. has a branch in Quezon City. On December 31, 2009, Shipments from Main Store 52,800
Quezon City Branch account in the home office books showed a balance of P383,655. The Expenses 31,440
interoffice accounts were the same at the beginning of the year. For purposes of reconciling Home Office 14,400
the reciprocal accounts, the following facts were ascertained:
What was the actual branch income for 2019 on a cost basis assuming the use of the
a. The home office inadvertently recorded a remittance for P4,800 from its Bacolod branch provisions of the Statement of Financial Accounting Standards? 18,960
as a remittance from its Quezon City branch.
b. The branch failed to take up a P850 debit memo from the home office representing the
share of the branch in marketing expense. Problem 6: Trisha Bark Company operates a branch in Zamboaga City. There are shipments
in transit from home office to the branch. The home office shipped merchandise to the branch
at 125% of cost in the year 2019. Operating data for the home office and the branch is as be delivered by Entity A on January 30, 2021. On the same day, in order to protect itself from
follows: the risk of changes in fair value of the firm commitment due to changes in underlying foreign
currency, Entity A entered into a forward contract with a bank for the sale of 1,000 Yen at the
forward rate on November 1, 2020. IAS 39 provides that hedge of the foreign currency risk of
Home Office Branch a firm commitment may be accounted for as either fair value hedge or cash flow hedge. Entity
Sales P250,000 P75,000 A elected to account for the hedge of the firm commitment using fair value hedge. The
following direct exchange rates are provided:
Purchases from outsiders 200,000 15,000
Shipments to branch: November 1, 2020 December 31, 2020 January 30, 2021
Cost to home office
30,000
Billing price to branch 32,500 Buying spot rate P10 P13 P12
Expenses 40,000 10,000 Selling spot rate P13 P15 P16
Inventories, January 1, 2019 Forward buying 90-days P11 P14 P15
Home office, acquired from outsiders, at cost Forward selling 90-days P13 P16 P17
Branch: Forward buying 60-days P14 P17 P16
Acquired from outsiders, at cost Forward selling 60-days P15 P18 P14
80,000 Forward buying 30-days P11 P15 P12
Acquired from home office, at billed price, which 7,500
average 24,000 Forward selling 30-days P13 P11 P14
20% above cost
Inventories, December 31, 2019 What is the book value of firm commitment asset/(liability) on December 31, 2020?
Home office, acquired from outsiders, at cost 4,000 asset
Branch:
Acquired from outsiders, at cost 55,000 What is the amount recognized as sales on January 30, 2021?
5,500
Acquired from home office, at 2019 billed price 11,000
21,000
(physical count)
Problem 10: When will the Equivalent Unit of Production (EUP) of direct materials under
What is the combined ending inventory? 81,300 FIFO-Process Costing be always the same with the Equivalent Unit of Production (EUP) of
direct materials under Average-Process Costing?
What is the combined cost of goods sold? 241,200 A. When all direct materials are added at the middle of the production process.
B. When all direct materials are added at the end of the production process.
C. When all direct materials are added at the start of the production process.
What is the combined net income? 27,500
D. When direct materials are added evenly throughout the production process.

Problem 11: On October 31, 2020 Hope Corp. bought inventory from a foreign supplier
Problem 7: Which of the following transactions will require debit to home office account in the
costing $125,000 and the payment is due on January 31, 2021. The company also paid
separate accounting book of the branch?
P25,000 to acquire an at-the-money call option for $125,000 and the option price was
a. Collection by home office of branch's receivables
P10.50. Relevant data are given below:
b. Payment by home office of branch's payables
c. Net income of the branch
Date 10/31/2020 11/30/2020 12/31/2020 01/31/2021
d. Shipment by home office of merchandise to branch
Selling spot rate ? 10.52 10.81 10.85
Fair value option ? 35,750 42,500 ?
Problem 8: Under PAS 2, what is the measurement of inventory of the branch in the external
statement of financial position of the company?
Under split accounting, what is the forex gain/(loss) in the ineffective portion for the year
a. Historical cost
ended December 31, 2020?
b. Fair value
(21,250)
c. Lower of historical cost or net realizable value
d. Billed price or historical cost depending on the source of inventory
What is the net impact in profit or loss as a result of the hedging activity for the year
ended December 31, 2021?
Problem 9: On November 1, 2020, Entity A. entered into a firm commitment with a Japanese Net loss: (3,750)
Company for the export of dried mangoes with a contract price of 1,000 Yen. The goods will
Problem 12: On January 1, 2020, Entity A, an SME, and Entity B, an SME, incorporated
Entity C by investing P1,000,000 each for 50% interest. For the year ended December 31, The following direct exchange rates are provided:
2020, Entity C reported net income of P400,000 and distributed dividends to common
stockholders amounting to P100,000. On December 31, 2020, Entity B estimated that the fair January 1, 2019 P40
value of its investment in Entity C is P1,500,000. The cost of selling this investment is December 31, 2019 43
estimated at 30%. The value in use of the investment based on the discounted cash flows of December 1, 2020 41
the investment is P1,100,000. December 31, 2020 45
Average rate 2020 44
What is the book value of Investment in Entity C to be reported in the statement of financial
position of Entity B as of December 31, 2020 under the different models allowed by PFRS for 53. What is the translated retained earnings balance on December 31, 2020?
SMEs for this type of investment? A. 600,000
B. 671,600
a. Under Fair Value method 1,500,000 C. 688,000
b. Under Cost Method 1,000,000 D. 563,600
c. Under Equity Method 1,100,000
54. What is the cumulative translation credit that should to be presented in the statement
Problem 13: On November 1, 2020, Entity A entered into a forward contract to buy $2,000 of financial position on December 31, 2020?
with a bank to speculate on the changes in the value of USA Dollar. It will be delivered on A. 88,400
January 31, 2021. The following direct exchange rates are provided by the bank: B. 10,400
C. 53,600
11/01/2020 12/31/2020 D. 49,200
01/31/2021
Buying spot P40 P37 P38 Problem 15: JPG Company is employing process costing regarding its production cycle.
Selling spot P45 P50 P48
Buying forward-30 days P38 P32 P35 Conversion costs are added uniformly during the production process while direct materials
Selling forward-30 days P34 P41 P36 are added at the start of the process. Normal spoilage is 10% of units started during the year.
Buying forward-60 days P43 P35 P46
Selling forward-60 days P40 P41 P43 The entity is conducting inspection when the production process is at 45% of conversion cost.
Buying forward-90 days P42 P40 P38 The entity provided the following production data during the year:
Selling forward-90 days P43 P40 P36
What is the foreign currency gain or (loss) for the year ended December 31, 2020? 1,480 Beginning Work in Process Inventory 20,000 units (40% incomplete as to conversion costs)
Units started during the year 80,000 units
Problem 14: Entity A owns majority of the outstanding ordinary shares of Entity B which is Ending Work in Process Inventory 10,000 units (80% complete as to conversion costs)
operating in United States of America wherein the functional currency is the USA $. However, Units completed during the period 76,000 units
the presentation currency of Entity B is the Philippine Peso because that is the presentation
currency of Entity A. For the year ended December 31, 2020, Entity B presented its What is the equivalent unit of production for direct material under average process
Statement of Financial Position in its functional currency of USA $: costing?
82,300

Current assets $20,000 Current liabilities $20,000 What is the equivalent unit of production for conversion cost under average process
Noncurrent assets 80,000 Noncurrent liabilities 40,000 costing? 90,300
Ordinary share capital 10,000
Preference share capital 16,000 What is the equivalent unit of production for conversion cost under FIFO costing?
Retained earnings 14,000 78,300
Total Assets $100,000 Total Liabilities and shareholders $100,000
Problem 16: Under IAS 21, foreign exchange differences arising from translating foreign
 B reported $2,000 net income during 2020 and declared dividends in the amount of $400 currency denominated transaction to functional currency shall be recognized in
on December 1, 2020. A. Profit or loss
B. Other comprehensive income with reclassification adjustment
 The translated amount of retained earnings on December 31, 2019 is P600,000. C. Retained earnings
D. Other comprehensive income without reclassification adjustment