THEORIES: FOREX AND HYPERINFLATIONARY Notes:

1 D. (Foreign and Functional Currency are not similar) 1 Advances to Employees

2 C. (Secondary Factor - Financing & Investing) a
3 D. (Buying & Selling are not the same) b
4 C. c
5 B.
6 B. (Incorrect: Statement #4 since Non-monetary items measures @FV is re-translated)
Advances to Employees
Salary Non-Monetary
Subject to Liquidation Non-Monetary most likely
Loan Monetary

re-translated)
REVIEW QUESTION 7 (BOTH CASES ARE DENOMINATED FOREIGN CURRENCY TRANSACTION)

Case 1: IMPORT @ SELLING RATE

Debit
OD October 25, 20x1 No entry (No accountable event yet)
TD November 1, 20x1 Purchases/Merchandise Inventory ₱ 5,000,000.00
Accounts Payable
BD December 31, 20x1 Exchange Loss ₱ 400,000.00
Accounts Payable
SD February 14, 20x2 Accounts Payable ₱ 5,400,000.00
Cash in Bank
Gain on Exchange
Alternative Solution:
Accounts Payable
OD ₱ -
TD ₱ 5,000,000.00
BD ₱ 5,400,000.00 400,000 Loss 20x1
SD ₱ 4,900,000.00 500,000 Gain 20x2
100,000 Gain
Case 2: EXPORT @ BUYING RATE
Debit
OD No Given
TD October 25, 20x1 Accounts Receivable ₱ 5,000,000.00
Sales
BD December 31, 20x2 Accounts Receivable ₱ 200,000.00
Exchange Gain
SD January 31, 20x2 Cash in Bank ₱ 2,350,000.00
Exchange Loss ₱ 250,000.00
Accounts Receivable
February 14, 20x2 Cash in Bank ₱ 2,400,000.00
Exchange Loss ₱ 200,000.00
Accounts Receivable

Alternative Solution:
Accounts Receivable
OD ₱ -
TD ₱ 5,000,000.00
BD ₱ 5,200,000.00 200,000 Gain 20x1
SD1 ₱ 2,350,000.00 250,000 Loss 20x2
SD2 ₱ 2,400,000.00 200,000 Loss 20x2

ANSWER: C.
ANSACTION)

Credit Dollar Value

$ 100,000.00 5M/P50 1:50

₱ 5,000,000.00
$ 100,000.00 (100KUSD*P54)-(100KUSD*50) 1:54
₱ 400,000.00
$ 100,000.00 (100kUSD*P49)-(100KUSD*54)
₱ 4,900,000.00 1:49
₱ 500,000.00

Credit Dollar Value

$ 100,000.00 100KUSD/0.02
₱ 5,000,000.00
$ 100,000.00 (100KUSD/0.01923)-100KUSD/0.02
₱ 200,000.00
$ 100,000.00 100KUSD/0.02128

₱ 2,600,000.00
100KUSD/0.02083

₱ 2,600,000.00
REVIEW QUESTION 8
IMPORT OF EQUIPMENT
Accounts Payable
December 1, 20x2 ₱ 500,000
December 31, 20x2 ₱ 450,000 50,000 Gain
January 15, 20x3 ₱ 480,000 30,000 Loss

FVTPL NMA@FV
Acquisition Cost * HR $ 20,000.00 ₱ 50.00 ₱ 1,000,000.00
FV, end * HR $ 20,200.00 ₱ 50.00 ₱ 1,010,000.00
FV, end * CR $ 20,200.00 ₱ 43.00 ₱ 868,600.00

FVTOCI NMA@FV
FV, beg * CR, beg $ 29,400.00 ₱ 52.00 ₱ 1,528,800.00
FV, end * CR, beg $ 29,700.00 ₱ 52.00 ₱ 1,544,400.00
FV, end * CR, end $ 29,700.00 ₱ 42.00 ₱ 1,247,400.00

FAAmo MA
AC, beg * CR, beg ₱ 50,000.00 52 ₱ 2,600,000.00
AC, end * CR, beg ₱ 50,000.00 43 ₱ 2,150,000.00

ANSWER: B.
 12/31/20x2 12/31/20x3
Cost ₱ 500,000.00 ₱ 500,000.00
AD ₱ 4,166.67 ₱ 54,166.67
CV ₱ 495,833.33 ₱ 445,833.33

10,000 Gain Change in FV Fa

P&L
141,400 Loss Change in FOREX Fo

15,600 Gain Change in FV Fa

OCI
29,700 Gain Change in FOREX Fo

P&L
450,000 Loss FOREX Fo
REVIEW QUESTIONS 9-10
9 D.

10 Foreign Subsidiary's Functional Currency is the Foreign Currency

Foreign Subsidiary's Functional Currency is the Philippine Peso
A.

11 Consideration Transferred
Less: BVINAA
Excess 180,000.00
Less: Undervaluation epmt. (180,000.00) Add: Epmt
GW/GBP - Acc Dep
DE
Undervaluation of Epmt. Unamortized Excess
B.

12 Merchandise Inventory, end 300,000.00 1.7 ₱ 510,000.00

Less: Unrealized Profit (160,000.00)
CFS ₱ 350,000.00
A.
 ₱ 430,000.00 TRANSLATION

AR ₱ 200,000.00
PI ₱ 60,000.00
PPE ₱ 110,000.00
Patents ₱ 90,000.00
TOTAL ₱ 460,000.00 FOREIGN CURRENCY DENOMINATED TRANSACTION

Preggy Plastik
PHP RS
20x1 20x2 20x3
₱ 131,400.00 180000
₱ 43,800.00 60000
₱ 45,000.00 60000
₱ 87,600.00