ST.

SCHOLASTICAS COLLEGE
Leon Guinto, Manila

ACCOUNTING FOR NON GOVERNMENT PROF. ROEL E. HERMOSILLA

AND NON PROFIT ORGANIZATION

Instructions: Solve each problem in your worksheet and present your computations in GOOD FORM.
NO SOLUTIONS, NO CREDITS.

FINAL ANSWERS
1 6 11 16 21 26
2 7 12 17 22 27
3 8 13 18 23 28
4 9 14 19 24 29
5 10 15 20 25 30

1. Charlie Company, a Philippine Corporation, bought inventory from a supplier in Japan on

November 2, 2022 for 50,000 yen, when the spot rate was P.4245. On December 31, 2022, the
spot rate was P.4295. On January 15, 2023, Charlie bought 50,000 yen at a spot rate of P.4250
and paid the invoice.

How much should Charlie report in its income statements for (1) 2022 and (2) 2023 as foreign
exchange gain or loss
A. (1) P250; (2) (P225) C. (1) P0; (2) (P225)
B. (1) (P250); (2) P225 D. (1) P0; (2) (P220)

2. On July 1, 2022, Steven Company lent P308,000 to a US supplier, evidenced by an interest-

bearing-note due on July 1, 2023. The note is equivalent to $8,000 on the loan date. The note
principal was appropriately included at P328,000 in Steven’s December 31, 2022 balance sheet.
The note was repaid to Steven on July 1, 2023 due date when the exchange rate was P39 to $1.

In its income statement for the year ended December 31, 2023 what amount should Steven’s
include as a foreign currency transaction gain or loss?
A. P 0 C. P 16,000 gain
B. P 26,000 gain D. P 16,000 loss

3. Certain balance sheet accounts of a foreign subsidiary in Japan of MINISO Incorporated at

December 31, 2023 have been translated into Philippine pesos as follows:

Current rate Historical rate

Accounts receivable P 120,000 P 100,000
Prepaid insurance 55,000 50,000
Copyright 75,000 85,000

What was the total amount included in MINISO’s December 31, 2023 consolidated balance sheet
for the above accounts?
A. P 255,000 C. P 240,000
B. P 235,000 D. P 250,000

4. A wholly-owned subsidiary in Hongkong of PHILIP Corporation has certain expense accounts for
the year ended December 31, 2020 stated in Hongkong dollars, as follows:

Depreciation (related assets were purchased on January 1, 2015) 120,000 HK$

Provision for doubtful accounts 80,000
Rent 200,000
The functional currency of Philip Corporation and its Hongkong subsidiary is the Phil. Peso.
The exchange rates for HK$ at various dates were as follows:
December 31, 2020 P 5.40
Average for the year ended December 31, 2020 5.44
January 1, 2015 5.50
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What total peso amount should be included in Philip Corporation’s 2020 consolidated income
statement to reflect these expenses?
A. P 2,176,000 B. P 2,183,000 C. P2,180,000 D. P2,132,000

5. On December 31, 2023 a foreign subsidiary of a GOLDEN Corporation submitted the following
balance sheet in foreign currency.
FC
Total assets 100,000
Total liabilities 20,000
Common stocks 50,000
Retained Earnings, 12/31/2023 30,000

The exchange rates for 1FC are as follows:

Current rate P 3.40
Historical rate 3.10
Weighted average rate 3.00

Assuming the retained earnings of the subsidiary on December 31, 2023 translated to Philippine
pesos is P 92,000 what amount of cumulative translation adjustment is to be reported in the
consolidated balance sheet on December 2023?
A. P 25,000 gain C. P25,000 loss
B. P 20,000 gain D. P 22,000 loss

6. On September 1, 2022 Lee Company received an order for equipment form a foreign customer for
FC 300,000 when the Philippine peso equivalent was P 96,000. Lee shipped the equipment on
October 15, 2022, and billed the customer for FC 300,000 when the Philippine peso equivalent
was P100,000. Lee received the customer’s remittance in full on November 16, 2022, and sold the
FC 300,000 for P105,000.

In its income statement for the year December 31, 2022, Lee should report a foreign exchange
gain of
A. P5,000 B. P4,000 C. P9,000 D. No gain no loss

7. Samsung Corporation had the following foreign currency transactions during 2020.
a) Merchandise was purchased from foreign supplier on January 20, 2020 for the peso
equivalent of P90,000. The invoice was paid on March 20, 2020 at the Philippine peso
equivalent of P96,000.
b) on July 1, 2020, Samsung borrowed the Philippine peso equivalent of P500,000
evidenced by a note that was payable in the lender’s local currency on July 1, 2020. On
December 31, 2020, the Philippine peso equivalent of the principal amount and accrued
interest were P520,000 and P26,000 respectively. Interest on the note is 10% per annum.

In Samsung income statement, the amount that should be included as a foreign exchange loss.
A. P0 B. P 21,000 C. P 6,000 D. P 27,000

8. The IBM Corporation owns a foreign subsidiary that had net income for the year ended December
31, 2020 of FC 4,800,000, which was approximately translated into P800,000.

On December 15, 2020, when the rate of exchange was FC 5.7 to P1.00, the foreign subsidiary
paid a dividend of FC 2,400,000. The dividend represented that net income of the foreign
subsidiary for the six months ended June 30, 2019 during which time the weighted average
exchange rate was FC 5.81 to P1.00 the exchange rate in effect at December 31, 2020 was FC 5.9
to P1.00.

What rate of exchange should be used to translate the dividen d for the December 31, 2020
financial statements?
A. FC 5.7 to P1.00 C. FC 5.90 to P1.00
B. FC 5.8 to P1.00 D. FC 6.00 to P1.00
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9. MINHO Corporation sold handicraft goods to a US firm for $100,000 in 2019. Pertinent
information on exchange rates follows:
Conversion Rate
(Peso to US$)
September 4 Receipt of order P 45.80
October 15 Date of shipment P 47.00
December 31 Date of balance sheet P 47.20
January 6, 2021 Date of settlement P 46.00

The sale would be appropriate recorded at

A. P4,700,000 B. P4,580,000 C. P4,72,000 D. P4,600,000

10. Under IAS 21, foreign exchange differences arising from translating foreign currency
denominated transaction to functional currency shall be recognized in
A. Profit or loss
B. Other comprehensive income with reclassification adjustment
C. Retained earnings
D. Other comprehensive income without reclassification adjustment

11. Under IAS 21, foreign currency gain or loss arising from translating foreign currency denominated
transaction to functional currency shall be recognized for which item?
A. Interest expense
B. Unearned revenue
C. Accounts receivable
D. Inventory

12. IAS 39 enumerated the following three types of hedging relationships, except
A. Fair value hedge: a hedge of the exposure to changes in fair value of a recognized asset
(AFS Securities) or liability or an unrecognized firm commitment, or an identified portion of
such an asset, liability or firm commitment, that is attributable to a particular risk and could
affect profit or loss.
B. Cash flow hedge: a hedge of the exposure to variability in cash flows that (1) is attributable to
a particular risk associated with a recognized asset or liability (such as all or some future
interest payments on variable rate debt) or (2) a highly probable forecast transaction and (2)
could affect profit or loss.
C. Hedge of a net investment in foreign operation which is the hedge of the amount of the
reporting entity’s interest in the net assets of the operation.
D. Undesignated hedge such as hedge of foreign currency denominated payable or receivable.

13. Under IAS 21, items of income and expenses at functional currency shall be translated into
presentation currency at
A. Historical rate
B. Closing rate
C. Average rate
D. Opening rate

14. JKL Company is operating in Philippine territory where the functional currency is Philippine Peso.
JKL exported on account merchandise to USA at a selling price of USA $1,000 to be collected the
following year. At the end of reporting period, JKL Company translated its Accounts Receivable
which is in USA Dollar to Philippine Peso. Where shall the differences arising from this
transaction be presented by JKL Company?
A. Profit or Loss Section of Statement of Comprehensive Income
B. Other Comprehensive Income with Reclassification Adjustment of Statement of
Comprehensive Income
C. Other Comprehensive Income without Reclassification Adjustment of Statement of
Comprehensive Income
D. Retroactive adjustment in beginning retained earnings of Statement of Changes in Equity
 Page 4

15. CALGARY had a receivable from a foreign customer that is payable in the customer’s local
currency. On December 31, 2022, CALGARY correctly included this receivable for 200,000 local
currency units (LCU) in its balance sheet at P 110,000. When CALGARY collected the receivable
on February 15, 2023, the Philippine peso equivalent was P 95,000.

In CALGARY’s 2023 consolidated income statement, how much should it report as a foreign
exchange loss?
A. P 0 B. P 10,000 C. P 15,000 D. P 29,000

16. Jolly Foods Company, a local company, bought furniture from Ailments Corporation, a US
company, for 35,000 US Dollars in 2022. Pertinent exchange rates relating to this transaction are
as follows:

Buying Rate Selling Rate

Receipt of order P 47.10 P 47.20
Date of shipment 47.25 47.45
Balance sheet date 49.50 49.60
Settlement date 49.45 49.50

What is the foreign exchange gain or loss of Jolly Foods Company for 2022?
A. P 78,750 loss C. P 78,750 gain
B. P 75,250 loss D. P 75,250 gain

17. Prince had the following information:

 Purchased merchandises from a foreign supplier on January 20, 2022 for the Philippine peso
equivalent of P60,000 and paid the invoice on April 20, 2022 at the Philippine peso
equivalent of P68,000
 On September 1, 2022, borrowed the Philippines peso equivalent of P300,000 evidence by a
note that is payable in the lender’s local currency on September 1, 2022. On December 31,
2022, the Philippine peso equivalent of the principal amount was P320,000.
In Prince’s 2022 Income statement, what amount should be included as a foreign exchange loss?
A. P4,000
B. P20,000
C. P22,000
D. P28,000

18. According to PAS 21, the effects of changes in foreign exchange rates, at which rate should an
entity’s non-current assets be translated when its functional currency figures are being translated
into a different presentation currency?
A. The historical exchange rate
B. The closing rate
C. The average rate
D. The spot exchange rate

19. According to PAS 21, the effects of changes in foreign exchange rates, exchange differences
should be recognized either in profit or loss in other comprehensive income. Are the following
statements about the recognition of exchange differences in respect of foreign currency
transactions reported in an entity’s functional currency true or false according to PAS 21?
(1) Any exchange differences on the settlement of a monetary item should be
recognized in profit or loss
(2) Any exchange difference on the translation of a monetary item at a rate different to
that used as initial recognition should be recognized in other comprehensive
income

Statement (1) Statement (2)

A. False False
B. False True
C. True False
D. True True

20. Foreign operations that are integral part of the operations of the entity would have the same
functional currency as the entity. When a foreign operation functions independently from the
parent, the functional currency will be
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A. That of the parent

B. Determined using the guidance for determining an entity’s functional currency
C. That of the country of incorporation
D. the same as the presentation currency

21. An entity started trading in country A whose currency was dollar. After several years, the entity
expanded and exported its product to country B whose currency was euro. The subsidiary is
essentially an extension of the entity’s own business, and the directors of the two entities are
common. The functional currency of the subsidiary is
A. The dollar
B. The euro
C. the dollar on the euro
D. Difficult to determine

22. On September 30, 2020, CCC ordered Machinery from a Japanese firm. The purchase order is
non-cancelable. The purchase price is 5,000,000 yens with delivery and payment to be on March
31, 2021. On September 30, 2020, CCC entered into forward contract to buy 5,000,000 yens on
March 31, 2021. On March 31, 2021, the machinery was delivered.
9/30/2020 12/31/2020 3/31/2021
Spot Rate 0.38 0.42 0.46
Forward Rate 0.39 0.44 -

What is the value of the equipment on September 30, 2020?

A. 0
B. 1,900,000
C. 1,950,000
D. 2,300,000

23. On September 30, 2020, CCC ordered Machinery from a Japanese firm. The purchase order is
non-cancelable. The purchase price is 5,000,000 yens with delivery and payment to be on March
31, 2021. On September 30, 2020, CCC entered into forward contract to buy 5,000,000 yens on
March 31, 2021. On March 31, 2021, the machinery was delivered.
9/30/2020 12/31/2020 3/31/2021
Spot Rate 0.38 0.42 0.46
Forward Rate 0.39 0.44 -
What is the value of the equipment on March 31, 2021?
A. 0
B. 1,900,000
C. 1,950,000
D. 2,300,000

24. On April 8, 2020, JANG Corporation purchased merchandise from an unaffiliated foreign
company for 5,000 units of the foreign company’s local currency. JANG paid the bill in full on
March 1, 2021 when the spot rate was P0.45. The spot rate was P0.60 on April 8, 2020 and was
P0.55 on December 31, 2020.
For the year ended December 31, 2021, JANG should report a transaction gain of
A. P1,500
B. P 500
C. P1,000
D. P 0

25. On June 15, 2020, GIM Corp. purchased merchandise worth 100,000 Swiss francs from its Swiss
supplier payable within 30 days under an open account arrangement. GIM issued a 30-day 6%
note payable in Swiss francs. On July 15, 2020 GIM paid the note in full.
The following information on spot rates (P/SF) are provided:
Buying Selling
June 15, 2020 P 24.03 P24.15
July 15, 2020 24.10 24.22
GIM Corporation’s foreign exchange gain or (loss) for the transaction is
A. (P5,040)
B. (P7,035)
C. P12,075
D. (P19,110)
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26. On September 30, 2020, CCC ordered Machinery from a Japanese firm. The purchase order is
non-cancelable. The purchase price is 5,000,000 yens with delivery and payment to be on March
31, 2021. On September 30, 2020, CCC entered into forward contract to buy 5,000,000 yens on
March 31, 2021. On March 31, 2021, the machinery was delivered.
9/30/2020 12/31/2020 3/31/2021
Spot Rate 0.38 0.42 0.46
Forward Rate 0.39 0.44 -

The December 31, 2020 profit or loss, net foreign exchange gain or loss (Forward contract and
commitment)?
A. 0
B. 50,000
C. 100,000
D. 250,000

27. On September 30, 2020, CCC ordered Machinery from a Japanese firm. The purchase order is
non-cancelable. The purchase price is 5,000,000 yens with delivery and payment to be on March
31, 2021. On September 30, 2020, CCC entered into forward contract to buy 5,000,000 yens on
March 31, 2021. On March 31, 2021, the machinery was delivered.
9/30/2020 12/31/2020 3/31/2021
Spot Rate 0.38 0.42 0.46
Forward Rate 0.39 0.44 -

The March 31, 2021 profit or loss, foreign exchange gain or loss (Forward contract)?
A. 0
B. 50,000
C. 100,000
D. 250,000

28. On September 30, 2020, CCC ordered Machinery from a Japanese firm. The purchase order is
non-cancelable. The purchase price is 5,000,000 yens with delivery and payment to be on March
31, 2021. On September 30, 2020, CCC entered into forward contract to buy 5,000,000 yens on
March 31, 2021. On March 31, 2021, the machinery was delivered.
9/30/2020 12/31/2020 3/31/2021
Spot Rate 0.38 0.42 0.46
Forward Rate 0.39 0.44 -
The March 31, 2021, foreign exchange gain or loss (on firm commitment), to be presented in
OCI?
A. 0 C. 100,000
B. 50,000 D. 250,000

29. On September 30, 2020, CCC ordered Machinery from a Japanese firm. The purchase order is
non-cancelable. The purchase price is 5,000,000 yens with delivery and payment to be on March
31, 2021. On September 30, 2020, CCC entered into forward contract to buy 5,000,000 yens on
March 31, 2021. On March 31, 2021, the machinery was delivered.
9/30/2020 12/31/2020 3/31/2021
Spot Rate 0.38 0.42 0.46
Forward Rate 0.39 0.44 -
What is the Firm Commitment Account balance as of December 31, 2020?
A. 250,000 Asset C. 350,000 Asset
B. (250,000) Liability D. (350,000) Liability

30. PENOY, a Philippine Corporation, bought inventory items from a foreign supplier in US on
November 5, 2019 for US$100,000, when the spot rate was P41.00. At PENOY’s December 31,
2019, year-end, the spot rate was P40.50. On January 15, 2020, PENOY bought US$100,000 at
the spot rate of P40.90 and paid the invoice.

How much should PENOY report as foreign exchange gain/(loss)in its 2019 and 2020 income
statements?
2019 2020 2019 2020
A. (50,000) 40,000 C. -0- 10,000
B. 50,000 (40,000) D. 10,000 -0-

reh/cde