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FOREIGN CURRENCY Exercises

1) Silent Company paid 31,800 CNY for goods from China on January 28, 2020. The CNY exchange rates on the invoice date of December 2, 2019 and payment date will affect the 2019 and 2020 profits respectively. 2) Great Company sold goods to Britain Corporation for 50,320 GBP on October 29, 2019, with payment due on January 30, 2020. The GBP exchange rates on the invoice and payment dates will affect the 2019 and 2020 profits respectively. 3) Sun Corp's subsidiary in Singapore had total assets of SGD 1,702,500 on December 31, 2019 and SGD 1,717,500 on December 31, 2020. The translation of these assets at historical and

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Mae Dionisio
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28 views

FOREIGN CURRENCY Exercises

1) Silent Company paid 31,800 CNY for goods from China on January 28, 2020. The CNY exchange rates on the invoice date of December 2, 2019 and payment date will affect the 2019 and 2020 profits respectively. 2) Great Company sold goods to Britain Corporation for 50,320 GBP on October 29, 2019, with payment due on January 30, 2020. The GBP exchange rates on the invoice and payment dates will affect the 2019 and 2020 profits respectively. 3) Sun Corp's subsidiary in Singapore had total assets of SGD 1,702,500 on December 31, 2019 and SGD 1,717,500 on December 31, 2020. The translation of these assets at historical and

Uploaded by

Mae Dionisio
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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FOREIGN CURRENCY TRANSACTIONS AND FOREIGN OPERATIONS

PROBLEM 1

On October 15, 2019, Silent Company, a Philippine company ordered merchandise to Loud Company, a company based in
China, for 31,800 Chinese Yuan (CNY), the merchandise was delivered on December 18, 2019. The invoice was dated
December 2, 2019, the shipping date, FOB Shipping Point. Silent Company paid the invoice on January 28, 2020.

The spot rates for a CNY on the respective dates were:

October 15, 2019 P7.69


December 2, 2019 P7.62
December 18, 2019 P7.56
December 31, 2019 P7.23
January 28, 2020 P7.32

1. What amount will affect the profit or loss in 2019?


2. What amount will affect the profit or loss in 2020?

PROBLEM 2

On June 26, 2019, Great Company, a Philippine company, sold goods on account to Britain Corporation for 50,320 Pounds
(GBP). The date of invoice is October 29, 2019 and payment is due on January 30, 2020.

Exchange rates for GBP were as follows:

June 26, 2019 P67.50


October 29, 2019 P68.70
December 31, 2019 P64.10
January 30, 2020 P62.40

1. What amount will affect the profit or loss in 2019?


2. What amount will affect the profit or loss in 2020?
PROBLEM 3

SUN CORP. owns a subsidiary in Singapore whose statement of Financial Position in Singapore Dollars (SGD) for the last two
years follow:
December 31, 2019 December 31, 2020
Assets
Cash and Cash Equivalents SGD 90,000 SGD 75,000
Receivables 367,500 442,500
Inventory 480,000 510,000
Property and Equipment (net) 765,000 690,000
Total Assets SGD 1,702,500 SGD 1,717,500

Liabilities and Equity


Accounts Payable SGD 165,000 SGD 225,000
Long Term Debt 967,500 855,000
Common Stock 345,000 345,000
Retained Earnings 225,000 292,500
Total Liabilities and Equity SGD 1,702,500 SGD 1,717,500

Relevant Exchange Rates are:

January 1, 2019 1 SGD = P45.00


December 31, 2019 1 SGD = P42.50
December 31, 2020 1 SGD = P47.50
Average 2019 1 SGD = P43.75
Average 2020 1 SGD = P45.00

Sun Corp. formed the subsidiary on January 1, 2019. Income of the subsidiary was earned evenly throughout the years. No
dividends were declared during 2019 and 2020.

Questions:

1. How much is the cumulative translation adjustment for 2019?


2. How much Foreign Currency Translation Adjustment (FCTA) equity account in 2020? How much is the translation
adjustment for 2020?

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