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Advanced Accounting 2

The document presents exercises related to advanced accounting, including true/false questions and multiple-choice answers. It details a foreign exchange transaction involving the purchase of inventory, adjustments for exchange rates, and calculations of foreign exchange gains and losses. Additionally, it outlines steps for determining total segment sales, traceable expenses, allocation of non-traceable expenses, and segment profit or loss calculations.

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38 views4 pages

Advanced Accounting 2

The document presents exercises related to advanced accounting, including true/false questions and multiple-choice answers. It details a foreign exchange transaction involving the purchase of inventory, adjustments for exchange rates, and calculations of foreign exchange gains and losses. Additionally, it outlines steps for determining total segment sales, traceable expenses, allocation of non-traceable expenses, and segment profit or loss calculations.

Uploaded by

f6807697
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Advanced accounting 2

Name Freweyni Hadsh ID no Acfn 13/24/88 Department Accounting and


finance

True or False

1. True
2. False
3. False
4. False
5. True
6. False
7. False
8. False
9. True
10. False

Choose the bast answer

1. D
2. E
3. D
4. D
5. E
6. C
7. C
8. B
9. D
10. D. It is longer-term in nature and is non-cancellable than financial lease

Exercise 1

Given:

Purchase Date: November 1, 2003

Amount Payable: 200,000 Euros

Spot Rates:

November 1, 2003: $1.07/€

December 31, 2003: $1.12/€

April 4, 2004: $1.09/€

Fiscal Year-End: December 31, 2003


No Hedging Activity
a) To record the purchase on November 1, 2003

Since the purchase is on credit, we recognize inventory and accounts payable using
the spot rate on November 1, 2003.

Calculation:

200,000 \times 1.07 = 214,000

Inventory (or Purchases) 214,000


Accounts Payable 214,000

b) Foreign exchange adjustment on December 31, 2003

At the year-end, we must adjust the payable to reflect the updated exchange rate of
$1.12/€.

New Payable Value:

200,000 \times 1.12 = 224,000

Foreign Exchange Loss:

224,000 - 214,000 = 10,000

Foreign Exchange Loss 10,000


Accounts Payable 10,000

c) Payment of liability on April 4, 2004

On April 4, 2004, the liability is settled at an exchange rate of $1.09/€.

Amount Paid:

200,000 \times 1.09 = 218,000

Foreign Exchange Gain/Loss Calculation:

224,000 - 218,000 = 6,000 (Gain)

Accounts Payable 224,000


Cash 218,000
Foreign Exchange Gain 6,000
Final Summary of Impact:

Total Foreign Exchange Loss (Dec 31, 2003): $10,000

Total Foreign Exchange Gain (April 4, 2004): $6,000

Net Foreign Exchange Loss: $4,000

Exercise 2

Step 1: Determine Total Segment Sales

Total Segment Sales = Sales to Unaffiliated Customers + Intersegment Sales

Sagment Sales to Intersegment sales Total


unaffiliated
customer
XXX 800 100,000 100,800
YYY 1,000 80,000 81,000
ZZZ 1,200 60,000 61,200
Total 3,000 240,000 243,000

Step 2: Compute Total Traceable Expenses

Total Traceable Expenses = Inter-segment Purchases + Other Traceable Expenses

Sagment Inter-segment Other Traceable Total Traceable


purchase Expenses Expenses
XXX 120,000 400,000 520,000
YYY 40,000 600,000 640,000
ZZZ 80,000 1,000,000 1,080,000
Total 240,000 2,000,000 2,240,000

Step 3: Allocate Non-Traceable Expenses

Non-traceable expenses will be allocated based on sales to unaffiliated customers.

First, we calculate the allocation ratio for each segment:

Sagment Sales to Allocation Ratio


Unaffiliated
Custemer
XXX 800 800/3000 = 26.67
YYY 1,000 1000/3000 = 33.33
ZZZ 1,200 1200/3000 = 40.00
Total 3,000 100%
Assume Total Non-Traceable Expenses = 3,000,000 (not provided, but we assume for
calculation).

Sagment Allocation Ratio Allocation Non-


Traceable Expenses
XXX 26.67% 800,000
YYY 33.33% 1,000,000
ZZZ 40.00% 1,200,000
Total 100% 3,000,000

Step 4: Compute Segment Profit (Loss)

Sagment Total sales Total trceable Allocation Profit (Loss)


expenses Non-Traceable
Expenses
XXX 100,800 520,000 800,000 ( 1,219,200 )
YYY 81,000 640,000 1,000,000 ( 1,559,000 )
ZZZ 61,200 1,080,000 1,200,000 ( 2,218,800 )
Total 243,000 2,240,000 3,000,000 ( 4,996,000 )

Segment XXX Loss: (1,219,200)


Segment YYY Loss: (1,559,000)
Segment ZZZ Loss: (2,218,800)
Total Company Loss: (4,996,000)

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