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Practice Set - Foreign Exchange - Afar

Practice set on foreign exchange under the Advanced Financial Accounting and Recording Subject - BS Accountancy

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Fannie Gail
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143 views3 pages

Practice Set - Foreign Exchange - Afar

Practice set on foreign exchange under the Advanced Financial Accounting and Recording Subject - BS Accountancy

Uploaded by

Fannie Gail
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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AEC 57 – PRACTICE SET ON FOREX ACCOUNTING

Instructions: If possible, boxed your final answers, if not, make sure, I’ll be able to
identify your final answer or else, I’ll follow what I can see.

PROBLEM 1.

BLACKPINK Corp. owns a subsidiary in Korea whose balance sheet in won for the last years
are as follows:

BLACKPINK formed the subsidiary on January 1, 2019. Income of the subsidiary was earned
evenly throughout the years and the subsidiary declared dividends worth 15,000 won on
September 12, 2019, and none were declared during 2020.

How much is the cumulative translation adjustment for 2020?

PROBLEM 2.

The trial balance on December 31, 2021 of LISAYAH Company, an overseas subsidiary of YG
ENTERTAINMENT located in Korea.
The following should be noted:

1. There was no foreign currency translation adjustment account at December 31, 2020.
2. The peso equivalent of retained earnings at December 31, 2020 was P1,320,000
3. When LISAYAH Company was incorporated and sold all of its shares above par value, the
exchange rate was 1 won = P50. No additional shares and no retirement or acquisition
of treasury shares had been made.
4. The dividends were declared and paid on September 30, 2021.
5. Sales, purchases and cash expenses had occurred evenly throughout the year.
6. The won to peso exchange rate on December 31, 2020 was the same on January 1, 2021.
7. The relevant exchange rates needed for translation were as follows:

How much is LISAYA’s total shareholders’ equity?

PROBLEM 3.

LALISA Corporation, a US firm, acquired 100% of JENDEUKIE Inc.’s outstanding stock at book
value on January 1, 2020, for $112,000. JENDEUKIE is a New Zealand Company, and its
functional currency is the USD. The exchange rate for NZ$ was $0.70 when LALISA acquired
its interest. JENDEUKIE’s stockholders’ equity on January 1, 2020, consisted of NZ$ 150,000
capital stock and NZ$ 10,000 retained earnings. The adjusted trial balance for JENDEUKIE at
December 31, 2020 is as follows:

Additional information.

1. Prepaid expenses (supplies) of NZ$ 18,000 were on hand when LALISA acquired JENDEUKIE.
Other operating expenses include NZ$8,000 of these supplies that were used in 2020.
The remaining NZ$10,000 of supplies is on hand at year end.
2. The NZ$120,000 cost of sales consists of NZ$50,000 inventory on hand at January 1,
2020 and NZ$100,000 in purchases during the year, less NZ$30,000 ending inventory
that was acquired when the exchange rate was $0.66.
3. The NZ$60,000 of equipment consists of NZ$50,000 included in the business combination
and NZ$10,000 purchased during 2020, when the exchange rate was $0.68. A depreciation
rate of 20% is applicable to all equipment for 2020.
4. Exchange rates for 2020 are as follows:

Remeasure the adjusted trial balance of JENDEUKIE Inc. into USD at December 31, 2020.

THEORIES.

A.
BLACKPINK INC., Korean-based company, has a foreign subsidiary, PRANPRIYA Corporation of
Thailand, whose functional currency is the USD. On December 31, 19X2, PRANPRIYA has an
account receivable denominated in Baht. Which one of the following statements is true?
a. Because all accounts of the subsidiary are translated into won at the current rate,
the Account Receivable is not adjusted on the subsidiary’s books before translation.
b. The Account Receivable is remeasured into the functional currency and remeasurement
obviates translation.
c. The Account Receivable is first adjusted to reflect the current exchange rates in USD
and then translated at the current rate into won.
d. The Account Receivable is adjusted to USD at the current exchange rate and any
resulting gain or loss is included as a translation adjustment in the stockholders’
equity section of the subsidiary’s separate balance sheet.

B.
For each of the 12 accounts listed in the table below, select the correct exchange rate to
use when either remeasuring or translating a foreign subsidiary for its Philippine parent
company.

Codes:
C = Current exchange rate
H = Historical exchange rate
A = Average exchange rate

Local currency is the Functional currency is


functional currency not the presentation
currency
1. Accounts receivable
2. Marketable debt securities, carried
at cost
3. Inventories, carried at cost
4. Deferred income
5. Goodwill
6. Other paid-in-capital
7. Depreciation
8. Refundable deposits
9. Common stock
10. Accumulated depreciation on
buildings
11. Deferred income tax liability
12. Accounts payable

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