If the functional currency is the local currency of a foreign subsidiary, what exchange

rates should be used to translate the items below, assuming the foreign subsidiary is in
a country which has not experienced hyperinflation over three years?
1) Equipment
2) Inventories
3) Depreciation Expense

1) Current Rate 2) Current Rate 3) Average Rate

1) Historical Rate 2) Current Rate 3) Historical Rate

1) Current Rate 2) Current Rate 3) Historical Rate

1) Historical Rate 2) Average Rate 3) Average Rate

General Feedback
1) Current Rate 2) Current Rate 3) Average Rate

A subsidiary of Salisbury, Inc. located in a foreign country whose functional currency

is the foreign currency (which is not currency of a hyperinflationary economy). The
subsidiary acquires inventory on credit on November 1,2017, for 100,000 foreign
currencies (FC) that is sold on January 17,2018 for 130,000 foreign currencies (FC).
The subsidiary pays for the inventory on January 31,2010. Currency exchange rates
for 1 foreign currency (FC) are as follows:
November 1 ,2017 P0.16 = 1
FC
December 31,2017 0.17 = 1
January 17,2018 0.18 = 1
January 31,2018 0.19 = 1
Average for 2018 0.20 = 1
What amount does Salisbury’s consolidated balance sheet report for this inventory at
December 31,2017?
P16,000 P18,000 P17,000 P19,000
General Feedback
P17,000

The following equity to an entity operating in a hyperinflationary economy:

Before After
PAS29 Restatement
Share capital 100 170
Revaluation 20 -
reserve
Retained earnings 30 -
 150 270
What would be the balances on the revaluation reserve and retained earnings after the
restatement for PAS 29?
Revaluation reserve 0, retained earnings 100 Revaluation reserve 100, retained
earnings 0 Revaluation reserve 20, retained earnings 80 Revaluation reserve 70,
retained earnings 30
General Feedback
Revaluation reserve 0, retained earnings 100

UA Company was organized in January 1, 2012. Selected balances as of December 31,

2015 were as follows:
Land (revalued on December 31, 2014) 1,000,000
Factory building (constructed December 31, 2012) 500,000
Investment property (purchased on January 1, 800,000
2012)
Inventory 600,000
Note receivable (received January 1, 2015 200,000

The general price index had moved on December 31 of each year as follows:
December 31, 2012 – 140; December 31, 2013 – 190; December 31, 2014 – 240;
December 31, 2015 – 280

The restated amount for inventory is

646,154 1,200,000 700,000 790,588
General Feedback
Solution:
GPI, 12/31/2014 240
GPI, 12/31/2015 280
Total 520
Divide by: 2
Average GPI 260
Inventory, P600,000 x 280/260 = P646,154

UA Company was organized in January 1, 2012. Selected balances as of December 31,

2015 were as follows:
Land (revalued on December 31, 2014) 1,000,000
Factory building (constructed December 31, 2012) 500,000
Investment property (purchased on January 1, 800,000
2012)
Inventory 600,000
Note receivable (received January 1, 2015 200,000
 The general price index had moved on December 31 of each year as follows:
December 31, 2012 – 140; December 31, 2013 – 190; December 31, 2014 – 240;
December 31, 2015 – 280

The fraction to be used in restating notes receivable

280/280 280/140 280/240 280/260
General Feedback
Solution:
Since notes receivable is a monetary item, it is not restated. Or if it is restated, the
fraction shall be equal to 1 based on the general price index as of the balance sheet date,
in this case, 280 as at December 31, 2015.

Royce Company operates in a hyperinflationary economy and provides the following

statement of financial position as of December 31, 2011
175,000
Cash
Inventory 1,350,000
Property, plant and equipment 450,000

Current liabilities 350,000

Non-current liabilities 250,000
Share capital (issuance date 200,000
2007)
Retained earnings 1,175,000

· The property, plant and equipment were purchased on December 31,

2009
· The non-current liabilities were loans raised on December 31, 2010
The general price index had moved each year as follows:
2007 100 2010 240
2008 130 2011 300
2009 150

The balance of property, plant and equipment after adjusting for hyperinflation
900,000 1,125,000 500,000 450,000
General Feedback
Solution:
Property, plant and equipment, P450,000 x 300/150 = P900,000

The following appear on the statement of financial position of AD Company

Cash in bank 1,000,000 Accounts payable 500,000
Accounts receivable 2,000,000 Accrued expenses 250,000
Advances to 100,000 Advances from 600,000
 employee customers
Advances to 200,000 Unearned revenue 150,000
suppliers
Prepaid expenses 50,000 Estimated warranty 100,000
liability
Inventory 750,000 Bonds payable 1,500,000
Available-for-sale 250,000 Finance lease liability 2,000,000
securities
Patent 500,000 Deferred tax liability 200,000

In preparing financial statements in a hyperinflationary economy, the amount

classified as monetary liabilities is
1,500,000 2,250,000 4,250,000 4,850,000
General Feedback
Solution:
Accounts payable 500,000.00
Accrued expenses 250,000.00
Bonds payable 1,500,000.00
Finance lease liability 2,000,000.00
Total monetary liabilities 4,250,000.00

Property was purchased on December 31,2018 for 20 million baht. The general price
index in the country was 60.1 on that date. On December 31,2018, the general price index
had risen to 240.4. If the entity operates in a hyperinflationary economy, what be the
carrying amount in the financial statements of the property after restatement? 20
million baht 80 million baht 1,200.2 million baht 3,808 million baht
General Feedback
80 million baht

Royce Company operates in a hyperinflationary economy and provides the following

statement of financial position as of December 31, 2011
175,000
Cash
Inventory 1,350,000
Property, plant and equipment 450,000

Current liabilities 350,000

Non-current liabilities 250,000
Share capital (issuance date 200,000
2007)
Retained earnings 1,175,000
 · The property, plant and equipment were purchased on December 31,
2009
· The non-current liabilities were loans raised on December 31, 2010
The general price index had moved each year as follows:
2007 100 2010 240
2008 130 2011 300
2009 150

The balance of the share capital after adjusting for hyperinflation

600,000 200,000 750,000 400,000
General Feedback
Solution:
Share capital, P200,000 x 300/100 = P600,000