IFRS 11 defines joint arrangement as an arrangement over which two or more parties

have joint control which is the contractually agreed sharing of control of an arrangement,
which exists only when the decisions about the relevant activities require the unanimous
consent of the parties sharing control. What is the classification of the joint arrangement
if the business formed is not structured through a separate vehicle? Joint operation
only Joint venture only Either Joint operation or Joint venture depending on the
substance of the transaction Jointly controlled entity
General Feedback
Joint operation only

Which of the following is not a characteristic of joint arrangement classified as joint

operation? The operators have right to the assets and obligation for the liabilities of
the operation The legal form of the separate vehicle does not confer separation
between the operators and the separate vehicle The operators have right to the net
assets of the operation. Without a separate vehicle, the joint arrangement is always
classified as joint operation
General Feedback
The operators have right to the net assets of the operation.

Apple Inc. and Samsung Inc. Incorporated an entity named Sample Inc. where in the
parties will have voting rights in the decision affecting the relevant activities of the
arrangement. The contract provides that unanimous consent by the parties is necessary for
the validity of Sample’s corporate act. The purpose of the arrangement is for Sample Inc.
to manufacture parts for the parties own manufacturing processes. The assets and
liabilities held in Sample Inc. are in are name of Sample Inc. what is the classification of
the interest of Apple Inc. and Samsung Inc. in Sample Inc. based on Sample Inc.’s Legal
form only. It shall be classified as Investment in Subsidiary because of the presence of
control It shall be classified as Investment in Associate because f the presence of
significant influence. It shall be classified as Joint Arrangement accounted for as
Investment in Joint Venture under Equity Method because Sample Inc. holds title over
the assets of the venture. It shall be classified as Joint Arrangement accounted for as
Joint Operation because in case of doubt, it shall be resolved in favour of Joint Operation.
General Feedback
It shall be classified as Joint Arrangement accounted for as Investment in Joint Venture
under Equity Method because Sample Inc. holds title over the assets of the venture.

Which of the following is not a characteristics of joint arrangement classified as joint

venture? The ventures have right t the net assets of the joint venture. The venturer
accounts for its interest in joint venture by recognizing Investment in Joint Venture and
accounting it using Equity Method under IAS 28 With separate vehicle, the joint
arrangement is always classified as joint venture The venture recognizes its share in
net income /(net loss from joint venture by increase/(decrease) in Investment in Joint
Venture account and records receipt of cash/property dividend from the venture with a
decrease in Investment in Joint Venture account.
General Feedback
With separate vehicle, the joint arrangement is always classified as joint venture

Pigskin Co., a Philippine corporation, sold inventory on credit to a British company on

April 8, 2018. Pigskin received payment of 35,000 British pounds on May 8, 2018. The
exchange rate was £1 = P1.54 on April 8 and £1 = P1.43 on May 8. What amount of
foreign exchange gain or loss should be recognized? (round to the nearest peso)
10,500 loss 10,500 gain 1,749 loss 3,850 loss
General Feedback
3,850 loss

Norton Co sold inventory on December 1, 2018, with payment of 10,000 British

pounds to be received in sixty days. The pertinent exchange rates were as follows:
December 1 P 1.7241
December 31 1.8182
January 30 1.6666

For what amount should Sales be reported on December 31 statement of profit or

loss?
5,500. 16,949. 18,182. 17,241.
General Feedback
17,241.

ATC corp purchases raw material from its foreign supplier, JLB, on May 8. Payment
of 2,000,000 foreign currency units (FC) is due in 30 days. May 31 is ATC's fiscal
year-end. The pertinent exchange rates were as follows:
Indirect Exchange
rates
May 8 0.8000
May 31 0.7937
June 7 0.8333

How much will it cost, in terms of the Functional Currency, ATC to finally pay the
payable on June 7?
1,666,667. 2,520,000. 2,500,000. 2,400,000.
General Feedback
2,400,000.

Brisco Bricks purchases raw material from its foreign supplier, Bolivian Clay, on May
8. Payment of 2,000,000 foreign currency units (FC) is due in 30 days. May 31 is
Brisco's fiscal year-end. The pertinent exchange rates were as follows:
Selling Spot Buying Spot
Rate Rate
May 8 P 1.25 P 1.23
May 31 P 1.26 P 1.25
June 7 P 1.20 P 1.21

How much Foreign Exchange Gain or Loss should Brisco record on May 31?
20,000 gain. 20,000 loss. 40,000 gain. 40,000 loss.
General Feedback
20,000 loss.

A speculative derivative would be similar to which type of hedge? An option

designated as a cash flow hedge. An option designated as a fair value hedge. A
forward contract designated as a cash flow hedge. A forward contract designated as a
fair value hedge.
General Feedback
An option designated as a fair value hedge.

Which of the following statements is true concerning hedge accounting? Hedges of

foreign currency firm commitments are used for future sales only. Hedges of foreign
currency firm commitments are used for future purchases only. Hedges of foreign
currency firm commitments are used for current purchases or sales. Hedges of foreign
currency firm commitments are used for future sales or purchases.
General Feedback
Hedges of foreign currency firm commitments are used for future sales or purchases.

Certain balance sheet accounts of a foreign subsidiary in Filam, Inc at December 31,
Year 2 have been translated into Philippine pesos as follows:

Current rate Historical Rate

Accounts receivable P120,000 P100,000
Prepaid insurance 55,000 50,000
Copyright 75,000 85,000
 What was the total amount included in Filam’s December 31, Year 2 consolidated
balance sheet for the above accounts?
P255,000 P235,000 P240,000 P250,000
General Feedback
P250,000

A subsidiary of Benilan[1], 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,Year 1, for
100,000 foreign currencies (FC) that is sold on January 17,Year 2 for 130,000 foreign
currencies (FC). The subsidiary pays for the inventory on January 31,Year 2.
Currency exchange rates for 1 foreign currency (FC) are as follows:
November 1 ,Year 1 P0.16 = 1 FC
December 31,Year 1 0.17 = 1
January 17,Year 2 0.18 = 1
January 31,Year 2 0.19 = 1
Average for Year 2 0.20 = 1

What amount does Benilan’s consolidated balance sheet report for this inventory at
December 31,Year 1?
P16,000 P18,000 P17,000 P19,000
General Feedback
P17,000

Which statement is true regarding a foreign currency option? A foreign currency

option gives the holder the obligation to buy or sell foreign currency in the future. A
foreign currency option gives the holder the obligation only sell foreign currency in the
future. A foreign currency option gives the holder the obligation to only buy foreign
currency in the future. A foreign currency option gives the holder the right but not the
obligation to buy or sell foreign currency in the future.
General Feedback
A foreign currency option gives the holder the right but not the obligation to buy or sell
foreign currency in the future.

On December 1, 2018, Keenan Company sold merchandise to Velez Company of

Spain for 150,000 euro. Payment is due on February 1, 2008. Keenan entered into a
forward exchange contract on December 1, 2018, to deliver 150,000 euro on February
1, 2008 for 0.97. Keenan chose to use a foreign currency option to hedge this foreign
currency asset designated as a cash flow hedge. Relevant exchange rates follow:
 Spot Rate Option
Premium
December 1, 2018 0.97 0.05
December 31, 2018 0.95 0.04
February 1, 2008 0.94 0.03

Compute the value of the foreign currency option at December 1, 2018.

6,000. 4,500. 3,000. 7,500.
General Feedback
7,500.

Which statement is true regarding a foreign currency option? A foreign currency

option gives the holder the obligation to buy or sell foreign currency in the future. A
foreign currency option gives the holder the obligation only sell foreign currency in the
future. A foreign currency option gives the holder the obligation to only buy foreign
currency in the future. A foreign currency option gives the holder the right but not the
obligation to buy or sell foreign currency in the future.
General Feedback
A foreign currency option gives the holder the right but not the obligation to buy or sell
foreign currency in the future.
On December 1, 2018, Keenan Company sold merchandise to Velez Company of
Spain for 150,000 euro. Payment is due on February 1, 2008. Keenan entered into a
forward exchange contract on December 1, 2018, to deliver 150,000 euro on February
1, 2008 for 0.97. Keenan chose to use a foreign currency option to hedge this foreign
currency asset designated as a cash flow hedge. Relevant exchange rates follow:
Spot Rate Option
Premium
December 1, 2018 0.97 0.05
December 31, 2018 0.95 0.04
February 1, 2008 0.94 0.03

Compute the value of the foreign currency option at December 1, 2018.

6,000. 4,500. 3,000. 7,500.
General Feedback
7,500.

On January 1,2017, the company entered into a two-year P100,000 variable interest rate
loan. In the first year of the loan, the interest rate is 10%. In its second year, the interest
rate is equal to the prime lending rate on January 1,2018. The company does not want to
bear the risk associated with the uncertain interest rate in the second year. Accordingly,
on January 1,2018, the company enters into a pay-fixed, receive-variable interest rate
swap with a speculator. The swap obligates the company to pay the speculator a fixed
amount of P10,000 (100,000 x .10) on December 31,2018. In return, the company will
receive from the speculator on December 31,2018 a variable amount received from the
speculator on December 31,2018 a variable amount equal to P100,000 multiplied by the
prime lending rate on January 1,2018. This amount received from the speculator is
exactly enough to pay the interest due on the variable-rate loan in 2018. Typically,
interest rate swaps such as this are settled with a single net cash payment rather than the
actual payment of P10,000 and receipt of the variable amount.

What net amount will the company pay or receive on December 31,2018 if the prime
lending rate on January 1,2018 is 15%.

P5,000 net payment P10,000 net payment 5,000 net receive 15,000 net
receive
General Feedback
5,000 net receive

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 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

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