CHAPTER 19

# CHAPTER 19 - CHAPTER 19 Multiple Choice 19-1 d Direct...

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CHAPTER 19 Multiple Choice 19-1: d. Direct exchange rate: December 1 1 ÷ 2.22 yen = P 0.45 December 31 1 ÷ 2.70 yen = 0.37 Decrease in forex rate P 0.08 Forex gain (200,000 yen x P0.08) P 16,000 19-2: c. Forex rate, December 1 P 0.45 Forex rate, December 31 0.47 Increase in forex rate P 0.02 Forex gain (1,500,000 yen x P0.02) P 30,000 19-3: d. September 30: Forex rate, September 1 P 5.61 Forex rate, September 30 5.59 Decrease in forex rate P 0.02 Forex gain (200,000 hkg.\$ x P0.02) P 4,000 December 31: Forex rate, October 1 P 5.59 Forex rate, December 30 5.62 Increase in forex rate P 0.03 Forex loss (200,000 hkg.\$ x P0.03) P (6,000) 19-4: c . Forex loss on importation of merchandise: Peso equivalent, January 10, 2004 P 600,000 Peso equivalent, April 20, 2004 608,000 Forex loss (increase) P (8,000) Forex loss on notes payable: Peso equivalent, September 1, 2004 P 3,000,000 Peso equivalent, December 31, 2004 3,200,000 Forex loss on principal P (200,000) Add: Forex loss on interest Based on P 3,2000,000 P 120,000 Based on P 300,000,000 (P3,000,000x10%x4/12) 100,000 20,000 Forex loss P (220,000) Total forex loss (P 8,000 + P220,000) P (228,000) 115

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19-5: a. Direct forex rate – Transaction date (P 1 ÷ \$0.018) P 55.5555 Direct forex rate – Balance sheet date (P 1 ÷ \$0.017) 58.8235 Direct forex rate – Settlement date (P 1 ÷ \$0.020) 50.0000 Forex gain (loss), 2004 Transaction date (\$10,000 x P55.5555) P 555,555 Balance sheet (\$10,000 x P 58.8235) 588,235 Forex loss (increase) P ( 32,680) Forex gain (loss), 2005 Balance sheet date (\$10,000 x P58.8235) P 588,235 Settlement data (\$10,000 x P 50.00) 500,000 Forex gain (decrease) P 88,235 19-6: b. Adjusted value of accounts receivable, 6/30 P 315,000 Peso equivalent, 7/27 300,000 Forex loss P (15,000) 19-7: a. 2004 Forex rate, 11/5/04 P 0.4295 Forex rate, 12/31/04 0.4245 Decrease in forex rate P 0.0050 Payable in foreign currency 50,000 Forex gain P 250 2005 Forex rate, 12/31/04 P 0.4245 Forex rate, 1/15/05 0.4345 Decrease in forex rate P 0.0100 Payable in foreign currency 50,000 Forex loss P (500) 19-8: a. (1000,000 FC x P 0.85) 19-9: c. (50,000 FC x P 0.6498) 19-10 : b Forward rate, 3/31/04 P 0.25 Selling spot rate, 4/30/04 0.22 Decrease P 0.03 Forward contract receivable 100,000 FC Forex loss P 3,000 116
19-11 : d. forex gain (loss) on purchase commitments is based on the changes in the forward rates. Forward rates – December 31, 2004 P .0055 90-day forward rate .0055 On December 31, 2004, no changes in forward rates occurred, so no forex gains (losses) are to be recognized on December 31, 2004 under both transactions. 19-12: b. Forward contract receivable (P100,000 Baht x P1.650) P 165,000 Spot rate (100,000 Baht x P1.600) 160,000 Forex loss P (5,000) 19-13: d. Import transaction – Based on spot rates: 12/31/04: Forex loss [1,000,000 Francs x (P6.01 – P6.16)] P (150,000) Forward Contract – Based on forward rates: 12/31/04: Forex gain [1,000,000 Francs x (P6.06 – P6.07)] P 10,000 Net forex loss P (140,000) 19-14: b. 12/31/04: Forex gain [\$5,000 x (P56.50 – P56.60)] P 500 3/31/04 : Forex loss: Forward contract receivable (\$5,000 x P56.60) P 283,000 Settlement at spot rate (\$5,000 x P56.32) 281,600 (1,400) Net forex loss P (900) 19-15: a. Increase in forward rates: Forward contract receivable, 11/1/04 (10,000 fc x P.78) P 7,800 Forward contract receivable, 12/31/04 (10,000 fc x P82) 8,200 Forex loss P (400) 19-16: b. Increase in forward rates [100,000 x (P.90 – P.93)] 19-17: c Gain from increase in intrinsic value of put option 100 Loss from decrease in fair value of available for sale securities (100) Loss from decrease in time value of the option (60 ) Net loss on hedging activity 12/31/07 (60 ) 19-18: a 117

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19-19: a 12/01/08: A\$ 70,000/P42,000= 1.667 A\$ to P1.00 12/31/08: A\$ 70,000/P41,700= 1.679 A\$ to P1.00 19-20: a, A\$70,000 x P.57 (December 31 forward rate) 19-21: a , The balance will not change, because it is denominated in Philippine peso.
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