45.

An entity denominated a December 15, 20x4, purchase of goods' in a currency other than its
functional currency. The transaction resulted in a payable fixed in terms of the amount of
foreign currency; and was paid on the settlement date, January 20, 20x5: The exchange rates
between the functional currency and the currency in which the transaction was denominated
changed at December 31, 20x4, resulting in a loss that should:
a. Not be reported until January 20, 20x5, the settlement date.
b. Be included as a separate component of stockholders' equity at December 31, 20x4.
c. Be included as a deferred charge at December 31, 20x4.
d. Be included as a component of income from. continuing operations for

Choose the correct answer for each of the following questions.

46. On October 1, 20x4 XY Company, a Philippine company, contracted to purchase foreign

goods requiring payment in pesos one month after their receipt in XY's factory. Title to the
goods passed on December 15, 20x4. The goods were still in transit on December 31, 20x4.
Exchange rates were 1 peso to 22 foreign currency units (FCUs), 20 FCUs, and 21 FCUs on
October 1, December l. 15, and December 31, 20x4, respectively. XY should account for the
exchange rate fluctuations in 20x4 as
a. A loss included in net income before extraordinary items.
b. A gain included in net income before extraordinary items.
c. An extraordinary gain.
d. An extraordinary loss.

47. On October 2, 20x4, LL Co., a Philippine company, purchased machinery from ST, a
foreign company, with payment due on April 1, 20x5. If LL's 20x4 operating income
included no foreign exchange gain or loss, then the transaction could have
a. Resulted in an extraordinary gain.
b. Been denominated in U.S. dollars.
c. Caused a foreign currency gain to be reported as a contra account against
machinery.
d. Caused a foreign currency translation gain to be reported as a separate
component of stockholders' equity.

48. Philippine based Corporation X has a number of importing transactions with companies
based in UK. Importing activities result in payables. If the settlement currency is the British
Pound, which of the following will happen by changes in the direct or indirect exchange
rates?
Direct Exchange Rate Indirect Exchange Rate
Increases Decreases Increases
Decreases
a. NA NA NA NA
b. Loss Gain Gain Loss
c. Loss Gain NA NA
d. Gain Loss Loss Gain