nber 1, 2011, Rosan Corp. received an order for equipment from a gn Customer for 300,000 local currency units (LCU] when the Philippine ji 1 was P96,000. Rosan shipped the equipment on’Oclober O11, and billed the customer for 300,000 LCU when the Philippine peso equivalent was P100,000. Resa ‘ed the customer's remitlance in full on November 14, 2011, and sold the 300,000 LCU far P105,000. In its income ment for Ihe ye ear ended December 31, 2011, Rosan should report a foreign excha transaction gain of;Hunt Co. purchased merchandise for £300,000 from a vendor in Londen on November 30, 2011. Payment in British pounds was due on January 30, 2012. The exchange rates lo purchase one pound were as follow: November30, December3i, January 30, 201) 201 2012. Spot-rate .. P7111 P71.00 P7150 30-day rate 75.00 73.00 72.00 60-day rate .... 74.50, 75.00 75.12 In its income statement, what amount should Hunt report as foreign exchange transaction gain (loss)? 11 2012 201 2012balance sheet accounts of a for December 31, 2011, have been tronsiate: ign subsidiary of Rowe into Philippine pesos ¢ Current rates Note receivable, long-term P240,000 Prepaidrent . 85,000. Potent 150,000 P475,000 The sub: lee sidiory’s functional currency is the currency of the country inwhichit s located. What total amount should be included in Rowan's D 31, 2011 consolidated balance sheet for the above account? mberdemamemnmmouann Sees. SR RGNSSHSW BRANT - A loreign subsidiary of Decker Corporation ‘ a Pe ai December 31, 201). Information relating to these OCcounts i, Philippine esos is as follows: Markelable securities, al cost... P. 65,000 Inventories, at average cost...... $00,000 PALGNES ceeesescses What total amount should be included in Decker's December 3 consolidated balance sheet for ihe above accounts if the subsidiary foreign operation operates independently or foreign operations is no} integral 1o the parent's operations?Westmore, Lid. is a Thailand subsidiary of a Philippine Company Westmore's functional currency is LCU. The following exchange rates were in effect during 2011: January 1 Pl = .625 baht June 30... Pl = .610 baht December 31 P] = .620 baht P1 = .630 baht Weighted average rate for he year Westmore reported sales of <1,500,000 during 2011. What amount {rounded} would have been included for this subsidiary in calculating consolidated soles?_Ace Corporation starts a subsidiary in o foreign country; the sos > functional Currency is the UCU. On January 1, Ace buys ai of tne su6' common stock for 20,000 foreign currencies (FC). On April |, the 3 purchases inventory for 20,000 FCs with payment made on May 1, and sells this inventory on August 1, for 30,000 FCs, which it collects on October |. Currency exchange rates for | foreign currency ore asf hows: Jonvary 1... PAS = 1 FC _ April 1. PAT= 1 Moy! . PAB=] August 1 PAg=1 October .. P.29= 1 December 31 Pdi=1 In preparing consolidated financial statements, what transiation adjustment wili Ace report at the end of tne current year?Posi, Inc., had a credit translation adjustment of P30,000 for the ye December 31, 2012. The functional currency of Post's subsidiary is the of the country in which il is located. Additionally, Pesi had a frorn a foreign customer payable in the local currency of the cu December 31, 2011, this receivable for 200,000 local currency wes correctly included in Post's balance sheet at P110,G00. Wher receivoble was collecled on February 15, 2012. ihe Philip equivalent was P120,000. In Post's 2012 Consolidated income stat how much should be reported as foreign exchange gain?On October 17, 2011,:Shirley Ireneo Co. purchased from a | inventory costing 10,000 baht. Payment is due cn January October 17, Shirley reneo Co. entered into a foreign exchange toner 10,000 bahi on January 15, 2012. Spot rate (bahi) .. Forward rate (baht) The December 31, 2011 profit and loss statement, foreign exchange gain or loss due to hedged item amounted to: 4) The December 31, 2011 profit and loss statement, foreign exchange gain or joss due to hedging instrument-férward contract:Meisner Co, ordered parts costing 100,000 baht for a foreign sppie: May 12 when Ihe spol rate was P.24 per baht. A one-mc contract was signed on that cate to purchase 100,000 bahts role of P.25 per baht. On June 12, when the parts were re j paymeni was made, the spot rate was P.26 per baht. Al what aroun! | should inventory be reported?On December 1, 201, Joseph Company, a Philippine Company, er vered inio a three-month forward contract to purchase 1,000,000 foreign currencies on March 1, 2012. The following peso per peso exchange rates opplies: Forward Rate Spot Rate (Mar. 1, 2012} December 1, 2011 P0.044 P0042 December 31, 2011 PO.040 P0.03: March 1, 2012 PO.038, NIA Joseph's incremental borrowing rate is 12 percent. The presertt value facior for wo months at an annual interest rate of 12 percent (1 percen! ce monih} is .9803. Which of the following is included in Joseph's Decer 31, 2011 balance sheet for the forward contract?On October 1, 2011, IMI Company ordered some equipment from a suppl 200,000 baht. Delivery and payment is fo accur on November 30, 2011, Thi rates on October | and November 30 are P1.50 and P1.30. If he company does not hedge the commitment, at what amount is the equipmen| recorded on the books on November 30, 20112 any unfavorable changes in fair value of the equipmeni, at what amour! is the equipment recorded on the books on November 30, 20112 The @ «If the company acquires on October 1, 2011 a forward contract fo hedge October 1, 2011 forward rate for November 30 settlement is P1.35.On March 1,°2011, Westfields Corp. received an order for parts from a foreign customer at.a price of 500,000 foreign currencies.with a delivery date of April 30, 2011. On March 1, whe the peso-foreign currency spot rate is PO.115, Westfields Corp. entered into a two-month forward contract to sell 500,000 foreign currencies at a forward rate of P0.12 per foreign currency. It designates the forward contract as a fair value hedge of the firm commitment to receive foreign currencies, and the fair value of the firm commitment is measured by referrting to changes in the peso forward rate, Wesifields.delivers the parts and receives payment-.on April 30, 2011, when the foreign currency rate is P0.118. On March 31, 2011, the foreign currency spot rate-is P0.123, and the forward contract has. a fair value of P1,250. What is the net impact on Westfields net income for the quarter ended March 31, 2011, as a result of the fonvord contract hedge of a firm commitment?eo ® Financia! asset. New Yor Jew Gnd ott irensactions in the cor Unit. The tunctiong! curency 0! decices tonedge the tisk of curren over the next six manth on enter June 30,2011, cton exchange rat Giscount rate is 6%. cone rye ¥ fluctuations on this cvolcole. Into e tornara contrac! to eof FC L2 per per6 [P1412 :FC 1}. The following toble summarizes the key date: Spot rote Forward Rate of contract Dote Shore Price (FC) FO perpeso expiring 6/20/2011 [FC per peso} i/ifzoil 1.00 £0 2 YAU 10 45 ob 6/0/2011 200 70 70 What is the gain or loss on availabie-for-scle security on March 31, 20117 31,2011? What is the net foreign exchenge gein or loss on foreign currency on March Whet is the gain or loss on available-for-sale security on June W, 2011%wary 1, 2011, tne company entered into a two-year P100,000 variable inter- ‘oan. In the first year of the loan, the interest rate is 10%. In its second year, he interest rate is equal to the prime. lending rate on January 1, 2012. The com- pany Coes not wont to bear the risk associated with the uncertain interest rate in ie Secon year. Accordingly, on January 1, 2011, the company enters into a pay- xed, receive-variable interest rate swap with a speculator. The swap obligates ihe company fo pay the speculator a fixed amount of P10,000 (P100,000 x .10) on December 31, 2012. In retum, the company will receive from the speculator on December 31, 2012 a variable amount received from the speculator on Decem- ber 31, 2012 a variable amount equal fo P100,000 multiplied by the prime lending tate on January 1, 2012. This amount received from the speculatoris exactly encugh to pay the interest due on the variable-rate loan in 2012. Typically, interest rate Swaps such as this are setiled with a single net cash payment rather than the Ccival payment of P10,000 and receipt of the variable amount. Compute the notional amount of the derivative contract:10 On January 1.20115 Conrading Company rece interest payments occurring at tr nd of each year and th repaid on December 31, 2012. ihe interest rate for the first year market rate of 8% and the rate in 2012 will be equal 10 ihe mor on January 1, 2012. In conjunction with this loan. Conrading ent estraie swap agreement toreccive o swap payin Jonuary 1, 2012 interest rate is greater than 8% anc if th e rate is less than 8%. The interest swap payment wil 31,2012. On December 31, 2011 (January 1, 2012). the inter trate is 7%. ® The fair value of the swap contract on January 1, 2011 should be: What amount will Conrading report as the fair value of the interest rate swap (obligation under swap contract - a liability account) cit December 31, 2011 (answers rounded fo the nearest peso)? ® What will be Conrading’s setilernent payment to/from?On July 1, 2011, the Groovy Corporation issued 0 2-year note with a fac of P4,000,000 and a fixed interest rote of 9%, payable on a semiannual Jonvary 15. 2012, the company entered into an interest rate swap wi Cio institution in anticipation of lower variable rates. At th: swap. the company paid o premium of P?,200. The swap har of P4,000,000 ond called for the payment of a vanabie rate cf change for 0 7% fixed rate. The variable rates are areset semiannuc Jenvary 1. 2012, in order to determine the next interest payment between rates on the swap will be settled on a semiannual basis. V interest rates and the valve of the swap on selectred dates are as Variable Reset Date Interest Rate January |, 2012 8.75% June ®. 2012 8.50% December 31, 2012 8.85% % Compute the nef interes! expense on June 30 and December 31, 20The company’s a golf course developer that constructs approximately 10 courses per year. Next year the cornpany will buy 10,000 trees in the courses if builds. in (i: years. the price of trees has fluctuated wildly, To eliminate this uncer- tainty, the company has found a reputable financial institution that wil enter qd into a forward contract for 10,000 trees. On January 1, 2011, the company a to buy 10,000 trees on January 1, 2012 from the financial institufion. The price is 861 07 500 per tree. Of course, the financial institution doesn't own any trees. As with most derivative contract, this agreement will be setiled by an exchange of cosh en January"l, 2012 based on the price of trees on that date Compute the notional cmount of the derivative contract: An What net amount will the golf course developer pay or receive on January 1, 2009 under the forward contract if the price of each tree on that date is F200. Assuming the same data in No. 2, comy pute the total amount {including all forward contract-related cash flows) that the golf fevel i ® pay to buy 10,000 trees in 2012. oy oe eerste