VSA CPA Review

Advanced Financial Accoun.ng and Repor.ng Foreign Currency Accoun.ng

FOREIGN CURRENCY TRANSACTION

1. On August 30, 2025, QSX Company purchased machinery from the US worth $100,000. The payable will be seOled in 2026.
The exchange rate of pesos to a dollar are P50, P53 and P52 on August 30, September 30 and December 31, respec.vely. How
much should be reported as foreign currency denominated payable on December 31, 2025?
a. P5,200,000 c. P5,000,000
b. P5,300,000 d. P5,100,000

2. On August 30, 2025, QSX Company purchased machinery from the US worth $100,000. On December 31, 2025, the balance
sheet date, only half of the debt remained. Half was paid on September 30, 2025. The exchange rate of pesos to a dollar are
P50, P53 and P52 on August 30, September 30 and December 31, respec.vely. How much should be reported as foreign
currency denominated payable at the on December 31, 2025?
a. P5,200,000 c. P2,600,000
b. P5,300,000 d. P2,650,000

3. On August 30, 2025, QSX Company purchased machinery from the US worth $100,000. On December 31, 2025, the balance
sheet date, only half of the debt remained. Half was paid on September 30, 2025. The exchange rate of pesos to a dollar are
P50, P53 and P52 on August 30, September 30 and December 31, respec.vely. How much foreign currency transac.on loss
should be recognized in the year ended December 31, 2025?
a. P200,000 c. P150,000
b. P100,000 d. P250,000

4. On September 30, 2025, QSX Company purchased machinery from the US worth $100,000. The machine has a useful life of
10 years. On December 31, 2025, the balance sheet date, only half of the debt remained. Half was paid on October 30, 2025.
The exchange rate of pesos to a dollar are P50, P53 and P52 on September 30, October 30 and December 31, respec.vely.
How much should be reported as the cost of the machine on December 31, 2025?
a. P5,000,000 c. P4,500,000
b. P5,300,000 d. P4,875,000

5. On September 30, 2015, QSX Company purchased machinery from the US worth $100,000. The machine has a useful life of
10 years. On December 31, 2015, the balance sheet date, only half of the debt remained. Half was paid on October 30, 2015.
The exchange rate of pesos to a dollar are P50, P53 and P52 on September 30, October 30 and December 31, respec.vely.
How much should be reported as the carrying amount of the machine on December 31, 2015?
a. P5,000,000 c. P4,500,000
b. P5,300,000 d. P4,875,000

6. On April 4, 2024, Pete Co. purchased merchandise for 100,000 foreign currency units. Payment is due to be received on August
2, 2024. Concurrently, Pete entered into a foreign exchange forward contract to hedge the sale transac.on. The relevant
exchange rates are as follows:
4/4/2024 6/30/2024 8/2/2024
Spot rate P.80 P.84 P.82
Forward rate (to August 2) .77 .83 .82
What amount of foreign exchange gain (loss) from this foreign currency denominated purchase contract should Pete include
in net income on 6/30/2024?
a. P(4,000) c. P(6,000)
b. P4,000 d. P6,000

7. On April 4, 2024, Pete Co. delivered to a foreign firm and sold merchandise for 100,000 foreign currency units. Payment is due
to be received on August 2, 2024. Concurrently, Pete entered into a foreign exchange forward contract to hedge the sale
transac.on. The relevant exchange rates are as follows:
4/4/2024 6/30/2024 8/2/2024
Spot rate P.80 P.84 P.82
Forward rate (to August 2) .77 .83 .82
What amount of foreign exchange gain (loss) from this foreign currency denominated sale contract should Pete include in net
income on 6/30/2024?
a. P(4,000) c. P(6,000)
b. P4,000 d. P6,000

HEDGING
8. On April 4, 2024, Pete Co. delivered to a foreign firm and sold merchandise for 100,000 foreign currency units. Payment is due
to be received on August 2, 2024. Concurrently, Pete entered into a foreign exchange forward contract to hedge the sale
transac.on. The relevant exchange rates are as follows:
4/4/2024 6/30/2024 8/2/2024
 Spot rate P.80 P.84 P.82
Forward rate (to August 2) .77 .83 .82
What amount of foreign exchange gain (loss) from this forward contract should Pete include in net income on 6/30/2024?
a. P(4,000) c. P(6,000)
b. P4,000 d. P6,000

9. On November 30, 2024, Filipinas, Inc. contracted to purchase merchandise from a foreign vendor at a future date. The goods
will arrive on January 31, 2025 and payment of 100,000 FC is due January 31, 2025. Exchange rates to purchase 1FC are as
follows:
Nov. 30, 2024 Dec. 31, 2024 Jan. 31, 2025 Feb. 28, 2025
Spot P1.60 P1.61 P1.63 P1.63
30-day 1.61 1.62 1.65 1.64
60-day 1.62 1.64 1.67 1.66
90-day 1.63 1.67 1.68 1.67

Filipinas, Inc. will record the merchandise at what value when it arrives in January?
a. P163,000 c. P160,000
b. P164,000 d. P161,000

10. On November 30, 2024, Filipinas, Inc. contracted to purchase merchandise from a foreign vendor at a future date. The goods
will arrive on January 31, 2025 and payment of 100,000 FC is due January 31, 2025. On November 30, 2024 Filipinas signed
an agreement with a foreign exchange broker to buy 100,000 FC on January 31, 2025. Exchange rates to purchase 1FC are as
follows:
Nov. 30, 2024 Dec. 31, 2024 Jan. 31, 2025 Feb. 28, 2025
Spot P1.60 P1.61 P1.63 P1.63
30-day 1.61 1.62 1.65 1.64
60-day 1.62 1.64 1.67 1.66
90-day 1.63 1.67 1.68 1.67

Because of this commitment hedge, Filipinas, Inc. will record the merchandise at what value aeer adjustment when it arrives
in January?
a. P162,000 c. P160,000
b. P161,000 d. P163,000

11. Using the same info as in the previous problem, how much is the net gain or (loss) from foreign transac.ons in the year 2024?
a. 1,000 c. (3,000)
b. (1,000) d. 0

12. On November 30, 2024, Filipinas, Inc. contracted to purchase merchandise from a foreign vendor at a future date. The goods
will arrive on January 31, 2025 and payment of 100,000 FC is due January 31, 2025. On December 31, 2024 Filipinas signed
an agreement with a foreign exchange broker to buy 100,000 FC on January 31, 2015. Exchange rates to purchase 1FC are as
follows:
Nov. 30, 2024 Dec. 31, 2024 Jan. 31, 2025 Feb. 28, 2025
Spot P1.60 P1.61 P1.62 P1.63
30-day 1.61 1.63 1.65 1.64
60-day 1.62 1.64 1.67 1.66
90-day 1.63 1.67 1.68 1.67

Because of this commitment hedge, Filipinas, Inc. will record the merchandise at what value aeer adjustment when it arrives
in January?
a. P162,000 c. P161,000
b. P164,000 d. P163,000

Refer to the following direct selling rates against the peso:

JPY (P0.10 spread) 10/31/24 11/30/24 12/31/24 1/31/25 2/28/25

Spot rate 0.55 0.50 0.45 0.44 0.40
30 days forward 0.60 0.55 0.46 0.42 0.35
60 days forward 0.70 0.47 0.59 0.46 0.26
90 days forward 0.85 0.84 0.60 0.38 0.36
120 days forward 0.90 0.77 0.44 0.48 0.50
13. On October 31, 2024, the Manila Company entered a forward contract to speculate on a sale of 54,300 Japanese Yen, to be
delivered on February 28, 2025. How much PHP should Manila Company receive on the seOlement date?
a. 48,870
b. 21,720
c. 43,440
d. 16,290
14. On November 30, 2024, the Manila Company entered into a sales commitment with a Japanese Company for 1 million
Japanese Yen, delivery on January 31, 2025. On the same date, the Manila Company entered a forward contract to hedge
against unfavorable fluctua.ons in the foreign exchange rates. How much is the net gain or loss from the firm commitment
and the hedging of the firm commitment on December 31, 2024?
a. 10,000
b. 20,000
c. 60,000
d. 0

15. On November 30, 2024, the Manila Company sold goods to a Japanese Company for JPY500,000, to be seOled on February
28, 2025. How much is the reportable amount of the accounts receivable on December 31, 2024?
a. 250,000
b. 200,000
c. 175,000
d. 225,000

TRANSLATION- CURRENT RATE METHOD

16. On December 31, 2025 a branch in Singapore submiOed the following financial statement stated in the foreign currency:
Balance Sheet Income Statement and
Retained Earnings
Monetary assets $120,000 Sales $162,000
Non-monetary assets 90,000 Expense 150,000
Monetary liabili.es 108,000 Net income $ 12,000
Common stock 72,000 Retained earnings,
beginning 18,000
Retained earnings, end 30,000 Retained earnings, end $ 30,000

The exchange rates are as follows:

Current rate P52

Historical rate P40
Average rate P50

Assuming the current rate method was used and that the retained earnings on January 1, 2025, the Singaporean Branch in
Philippine Pesos is P300,000.

Calculate the transla.on gain or loss on December 31, 2025 (indicate if gain or loss).
a. P1,524,000 gain c. P2,124,000 gain
b. P2,424,000 loss d. P1,084,000 loss

17. On December 31, 2025, a branch in Singapore submiOed the following financial statement stated in the foreign currency:

Balance Sheet Income Statement and

Retained Earnings
Monetary assets $120,000 Sales $162,000
Non-monetary assets 90,000 Expense 150,000
Monetary liabili.es 108,000 Net income $ 12,000
Common stock 72,000 Retained earnings,
beginning 18,000
Retained earnings, end 30,000 Retained earnings, end $ 30,000

The exchange rates are as follows:

Current rate P52

Historical rate P40
Average rate P50
 Assuming the current rate method was used and that the retained earnings on December 31, 2025 of the Singaporean Branch
in Philippine Pesos is P300,000.

Calculate the transla.on gain or loss on December 31, 2015 (indicate if gain or loss).
a. P1,524,000 gain c. P2,124,000 gain
b. P2,424,000 loss d. P1,084,000 loss

18. On December 31, 2025, a branch in Singapore submiOed the following financial statement stated in the foreign currency:
Balance Sheet Income Statement and
Retained Earnings
Monetary assets $120,000 Sales $162,000
Non-monetary assets 90,000 Expense 150,000
Monetary liabili.es 108,000 Net income $ 12,000
Common stock 72,000 Retained earnings,
beginning 18,000
Retained earnings, end 30,000 Retained earnings, end $ 30,000

The exchange rates are as follows:

Current rate P52
Historical rate (1/1/25) P40
Average rate P50

Calculate the transla.on gain or loss on December 31, 2025 (indicate if gain or loss).
a. P1,524,000 gain c. P2,124,000 gain
b. P1,104,000loss d. P1,104,000 gain

19. On January 1, 2024, the Maka. Corpora.on established a subsidiary in Hongkong. On February 15, 2025, the subsidiary
purchased inventory for HK$100,000. On December 31, 2025, HK$25,000 of the inventory purchased on February 15, 2025
made up the en.re inventory. The exchange rates were as follows:

January 1 to June 30, 2025 HK$0.138 = P1

December 31, 2025 HK$0.133 = P1

The December 31, 2025 inventory balance for Maka.’s branch should be translated into Philippine pesos in the amount of:
a. P181,159.42 c. P3,450.00
b. P187,969.93 d. P3,325.00

20. For 2025 a Korean subsidiary reported the following cost of sales:
Beginning inventory (FIFO) 40,000 Won
Purchases 300,000 Won
Ending inventory (FIFO) (30,000) Won

The exchange rate when the ending inventory items were acquired was P0.0510. The exchange rate for the Korean Won was
0.0490 on January 1 and 0.0540 on December 31. The average rate for the year was 0.0520.

What is the cost of sales in Philippines peso that will appear in the translated income statement?
a. P16,030 c. P16,740
b. P16,120 d. P15,940