CHAPTER 10

PROBLEM 10-2 PROBLEM 10-5

1 D Profit Loss
2 B V 3,400,000
3 A W 1,000,000
4 B X (2,000,000)
5 D Y 400,000
6 D Z (200,000)
7 C 4,800,000 (2,200,000)
8 B
9 B Profit (4.8M x 10%) 480,000
10 C
V 3,400,000 10% more of 4.8M
W 1,000,000 10% more of 4.8M
X -2,000,000 10% more of 4.8M
Y 400,000
Z -200,000

ANSWER B. V, W and X
APTER 10
PROBLEM 10-11
Sales 3,000,000
Less: Traceable cost 1,900,000
Allocated indirect cost (500,000 x 25%) 125,000
Interest Expense 300,000 2,325,000

Sergment Profit 675,000

ANSWER D. 675,000
 CHAPTER 11
PROBLEM 11-1 PROBLEM 11-7
1 C January 1,2023 Rate 12% 1
2 A January 1,2024 Rate 14%
3 B Increase in rate 2%
4 B
5 C Net cash to be paid (5M x 2%) 60,000
Multiply by: PV of 1 at 14% 0.877
Interest rate swap receivable 52,620

ANSWER B. 52,620

3
PTER 11
PROBLEM 11-10
Variable Rate on January 1, 2024 6%
Underlying Fixed Rate 10%
Variable Rate less than Underlying Rate 4%

Net cash to be paid (5M x 4%) 200,000

Multiply by: PV of an ordinary annuity of 1 at 6% 2.67
December 31 2023, Derivative Asset 534,000

ANSWER D. 534,000 Liability

Variable Rate on January 1, 2025 8%

Underlying Fixed Rate 10%
Variable Rate less than Underlying Rate 2%

Net cash to be paid (5M x 2%) 100,000

Multiply by: PV of an ordinary annuity of 1 at 8% 1.78
December 31 2024, Derivative Asset 178,000

ANSWER B. 178,000 Liability

Notional Amount 5,000,000

Multiply by: January 1, 2024 Rate 6%
Interest Expense, 2024 300,000

ANSWER B. 300,000
 CHAPTER 12
PROBLEM 12-1 PROBLEM 12-11
1 D 1 Market Price, December 31, 2023 28
2 B Less: Underlying Price 25
3 A Derivative Asset 3
4 D
5 D Call Option, Derivative Asset (20 x 3) 600,000
6 D Less: Payment for call option 50,000
7 B Unrealized Gain - OCI 550,000
8 D Answer A. 600,000
9 C
10 D 2

The loss on call option in 2024 is C. 20,000, which is the option premium
that the entity paid for the call option. Since the market price dropped on
July 1, 2024, it doesn't make sense to use the coupon to buy the asset at a
higher price so the company can just ignore the call option.

3 Market Price, 17/1/24 21

Less: Underlying price 25
Derivative Liability -4

Call Option - 12/32/23 (20k x 4) 800,000

Less: Loss in call option 20,000
Unrealized gain in 2024 580,000
Answer A. 800,000

4 Market Price - July 1, 2024 (20k x 21) 4,200,000

Loss on call option 20,000
Cost of Purchases 4,220,000
Answer D. 4,220,000
R 12
PROBLEM 12-12
Fair Value of Call Option (120-100) 20

Option to purchase shares 10,000

Multiply by: Fair Value of Call Option 20
Call Option Receipt 200,000

Answer C. Received P200,000 from

the bank

PROBLEM 12-14
Dollar Equivalent - August 31 (80M/93) 860,215.05
Dollar Equivalent - June 30 (80M/100) 800,000
Total Saving 60,215.05
Payment for the call option 12,000
Net Savings - Gain on call option 48,215.05
Answer B. 48,215