It refers to an obligation to deliver a fixed or a.

alien operation
determinable number of units of currency. * b. foreign transaction
c. foreign operation
a. monetary item
d. foreigner
b. non-monetary item
c. financial instrument When translating the financial statements of a foreign
d. monetary liability operation, which of the following translation
procedures is inappropriate

a. Assets, liabilities, and equity, including any

For a Philippine entity, which of the following
goodwill and FVAs, are translated at the closing
quotations for exchange rates is correct? *
rate.
a. Direct quotation:₱45:$65 ; Indirect quotation- b. Income and expenses are translated at the spot
₱65:$45 exchange rates. For practical reasons, income
b. Option 5 and expenses may be translated at the average
c. Direct quotation: ₱40:$1 ; Indirect quotation- rate.
1:$0.025 c. All resulting exchange differences shall be
d. Direct quotation:₱1:$0.022 ; Indirect quotation- recognized in profit or loss.
₱45:$1 d. All resulting exchange differences shall be
e. Direct quotation:₱45:$1 ; Indirect quotation- recognized in other comprehensive income.
¥.002:₱40

When translating the financial statements of a foreign

When a foreign currency transaction occurred and operation, the resulting exchange differences after
settled in the same period, * translating all assets, liabilities, equity, income and
expenses consists of all of the following, except *
a. none of these
b. all the exchange difference is recognized in the a. Translation of profit using average and closing
previous period. rates.
c. all the exchange difference is recognized in that b. Translation of opening net assets using opening
period. and closing rates.
d. all the exchange difference is recognized in the c. Translation of ending net assets using opening
next period. and closing rates.
d. Translation of goodwill using opening and
When several exchange rates are available, the rate closing rates.
used is *

a. the buying rate

b. that at which the future cash flows represented The accumulated translation differences from a foreign
by the transaction or balance could have been operation *
settled if those cash flows had occurred at the
a. remains within equity but cannot be reclassified
measurement date.
from one equity account to another equity
c. either a or b as a matter of accounting policy
account
choice
b. either a or b
d. the selling rate
c. is reclassified within equity when the foreign
operation is derecognized.
d. is reclassified to profit or loss when the foreign
It is an entity that is a subsidiary, associate, joint operation is derecognized.
venture or branch of a reporting entity, the activities of
which are based or conducted in a country or currency
other than those of the reporting entity. *
When an entity is operating under a hyperinflationary How much is the translated total assets?
economy, its financial statements *
a. ¥40M
a. are first prepared using PAS 1, translated using b. ¥36M
PAS 21, consolidated using PFRS 10, then c. ¥20M
restated using PAS 29 d. ¥18M
b. are first translated to the presentation currency
in accordance with PAS 21 before they are
restated in accordance with PAS 29. How much is the translated total equity? *
c. are first consolidated in accordance with PFRS
10, then restated in accordance with PAS 29, a. ¥20M
and finally translated to the presentation b. ¥40M
currency in accordance with PAS 21. c. ¥18M
d. are first restated in accordance with PAS 29 d. ¥36M
before they are translated to the presentation
currency in accordance with PAS 21.
How much is the translated profit or loss? *

a. ¥9M
b. ¥6M
Use the following information for the next three c. ¥12M
questions: d. ¥7M

Entity A has just started its operations on January 1,

20X1. On this date, Entity A’s equity consisted of P2M A Philippine company’s foreign subsidiary had these
share capital, which were issued also on this date. Entity amounts in foreign currency units (FCU) in 20X6:
A’s functional currency is the Philippine peso (P).
However, it wishes to present its 20X1 financial Cost of goods sold FCU 10,000,000
statements into Japanese yen (¥). The following Ending inventory 500,000
information was gathered on December 31, 20X1, after
a year of operation. Beginning inventory 200,000

Total assets P10M The average exchange rate during 20X6 was
Total liabilities P5M P0.80=FCU=1. The beginning inventory was acquired
Share capital 2M when the exchange rate was P1=FCU 1. Ending
Retained earnings 3M inventory was acquired when the exchange rate was
Total liabilities and equity P10M P0.75=FCU 1. The exchange rate at December 31, 20X6,
Income P7M was P0.70=FCU 1. Assuming that the foreign country is
Expenses (4M) highly inflationary, at what amount should the foreign
Profit P3M subsidiary’s cost of goods sold be reflected in the
Relevant exchange rates: Philippine peso income statement?

January 1, 20X1 (historical rate for the share capital) a. P8,090,000

b. P8,040,000
P1 : ¥2 c. P8,000,000
Average rate P1 : ¥3 d. P8,065,000

December 31, 20X1 (closing rate) P1: ¥4

 XYZ Inc. Carrying Fair Fair value
amounts values adjustments
On January 1, 20x1, PATRIMONY Co. entered into a joint (FVA)
arrangement classified as a joint venture. For an Inventory 23,000 31,000 8,000
investment of ₱2,000,000, PATRIMONY Co. obtained Equipment 50,000 60,000 10,000
30% interest in HERITAGE Joint Venture, Inc. During the (4 years
year, HERITAGE Joint Venture, Inc. reported profit of remaining
₱4,000,000 and other comprehensive income of life)
₱800,000, i.e., a total comprehensive income of Accumulate (10,000) (12,000) (2,000)
₱4,800,000. HERITAGE Joint Venture, Inc. declared d
dividends of ₱2,400,000. How much is the carrying depreciation
amount of the investment in joint venture on December Totals 63,000 79,000 16,000
31, 20x1? *

a. 2,720,000 During 20X1, the following intercompany transactions

b. 2,480,000 occurred:
c. 4,160,000  ABC Co. sold goods costing P12,000 to XYZ, Inc., for
d. 2,000,000 cash, at a markup of 40% on selling price. A quarter
of these goods are held in inventory by XYZ, Inc. by
year-end.
A, B and C formed a joint operation. Profit or loss shall  ABC Co. acquired inventory from XYZ, Inc. for
be divided equally. On the joint operation’s completion P12,000 cash. XYZ, Inc. uses a normal markup of
date, the books of A, the appointed manager, show the 25% above its cost. ABC’s ending inventory included
following account balances: P4,000 from this purchase.
Debit Credit The year-end individual financial statements are shown
JO – Cash 80 below:

Joint operation 20 Statements of financial position

B Co. 60 As of December 31, 20X1

C Co. 40 ABC Co. XYZ Inc.

Assets
A’s share in the joint operation’s profit is P16. A agreed Cash 41,000 67,750
to be charged for the unsold merchandise. How much is Accounts receivable 75,000 22,000
the cost of unsold merchandise charged to A? Inventory 97,000 10,400
Investment in 75,000
a. 68
subsidiary (at cost)
b. 72 Equipment 200,000 50,000
c. 28 Accumulated (60,000) (20,000)
d. 62 depreciation
Total assets 428,000 130,150
Liabilities and equity
On January 1, 20X1, ABC Co. acquired 80% interest in Accounts payable 43,000 30,000
XYZ, Inc. The business combination resulted to goodwill Bonds payable 30,000
of P3,000. On this date, XYZ’s equity comprised of Total liabilities 73,000 30,000
P50,000 share capital and P24,000 retained earnings. Share capital 170,000 50,000
NCI was measured at its proportionate share in XYZ’s Share premium 65,000
net identifiable assets. Retained earnings 120,000 50,150
Total equity 355,000 100,150
XYZ’s assets and liabilities on January 1, 20X1, Total liabilities and 428,000 130,150
approximate their fair values except for the following:
 equity When a foreign currency transaction occurred in one
period and settled in another period, *

Statements of profit or loss  exchange differences between the end of the

previous reporting period and the date of
For the year ended December 31, 20X1
settlement is recognized in the period of
ABC Co. XYZ Inc. settlement.
Sales 330,000 150,750  b and c
Cost of goods sold (185,000) (96,600)  exchange differences between the transaction
Gross profit 145,000 54,150 date and the end of reporting period is
Depreciation expense (40,000) (10,000) recognized in the period of transaction.
Distribution costs (32,000) (18,000)  the exchange differences between the
Interest expense (3,000) - transaction date and the date of settlement is
Profit for the year 70,000 26,150 recognized in the period of settlement.

How much is the total unrealized gross profit from the

intercompany sales of inventory?

a. 2,800
b. 2,000
c. 3,600
d. 800

How much is the NCI in net assets as of December 31,

20x1? *

a. 21,070
b. 19,350
c. 15,350
d. 18,350

How much is the consolidated retained earnings? *

a. 142,280
b. 136,720
c. 146,280
d. 130,280

How much is the consolidated profit or loss? *

a. 86,270
b. 79,450
c. 83,350
d. 78,750