1. The Home Office bills its KTH Branch for merchandise at 140% of cost.

At the end of the January,

2022, the branch reported the following merchandise at billed price from the home office.
Beginning inventory at P8,400 and Ending Inventory at P7,560. Shipments received amounted to
P28,280.

How much is balance of the allowance for overvaluation before adjustment?

Answer: 10,480

2. On July 1, 2020, Lokal purchased inventory from a foreign supplier for 30,000 foreign currency,
payable in 60 days. On July 1, 1FC = P0.6610, and by the day of settlement on September 1, 1FC
= P0.6256. The 60-day forward rate on July 1 is 1FC = P0.6498. Lokal should record the cost of
the inventory at.

Answer: 18,768

3. The Home Office Account: Match each item to a choice:

Fixed assets purchased by Branch not taken up by the Ho = Debit Investment to Branch Account

Inventory shipped by the home office was in transit to the branch = Credit Home Office Current Account

HO records the loss in operations of the branch = Credit Investment in Branch Account

Busan Branch just learned that its accounts receivable was collected by the HO = Debit Home Office
Current Account

HO record a remittance from Jeonju Branch as coming from Busan Branch = Credit Investment in Branch
Account

Busan Branch purchased inventory from a local supplier = No Effect

4. RM Branch was billed the Home Office at 20% above cost. It reported the following: Match each
item to a choice: (Table)

Gross profit of the branch as far as the HO is concerned? = 40,320

Ending Inventory of the Branch at Cost? = 28,000

5. If the Home Office pays for the shipping fee of the merchandise sent to the branch, which of the
following entries will not be made?

Answer: Debit Investment in Branch by the Home Office

6. The home office shipped merchandise to its branch billed at P150,000 including a mark up of
20% on cost. The branch reports opening and closing inventories of P90,000 and P120,000,
respectively. The home office has closing inventories of P220,000 which includes merchandise
held on consignment valued at P10,000. What closing inventory would be reported in the
combined statement of income for the year using periodic inventory system?

Answer: P310,000
 7. After a transaction denominated in foreign currency occurs, what should be recognized in the
Philippine company’s records as a result of the change in the foreign currency exchange rate?

Answer: Exhange losses and gains

8. On December 31, 2021 a foreign subsidiary in UAE submitted the following condensed
statement of financial position in foreign currency. Assuming that the retained earnings of the
subsidiary on December 31, 2021 translated to Philippine Peso is P200,00, what amount of
cumulative adjustment is to reported as other comprehensive income. (Table)

Answer: P37,000

9. On Feb. 1, 2022, Kim Corp. Received an order for equipment from a foreigner for 120,000 local
currency units (LCU) when the peso equivalent was P86,000. Kim shipped the equipment on
March 15,2022 and billed the customer for 120,000 LCU when the peso was P91,000. Kim
received the customer’s remittance in full on April 15, 2022 and sold the 120,000 LCU for
P95,000. The foreign exchange transaction gain for this transaction is.

Answer: P4,000

10. All of the following are true about derivatives, except. Select the correct response.

Answer: An increase in share price will result to a decrease in the value of an option

11. Which of the following statements is true? Select the correct response

Answer: Both statements are true

12. Pinay ng Pinas Corporation, has 25% equity investment in Italia Company based in Italy. On
December 31, 2020, year end exchange rate was one peso to P0.015 to a Euro. On this date,
Pinay has no transaction adjustment balance pertaining to its investment. To hedge its net
investment in Italia, Pinay borrows 4,000 Euros for one year 10% interest on January 1, 2021 at a
spot rate of 0.017 Euro to a peso.

Assume that on Novemebr 5, 2021, Italia declares and pays a 1,000 dividend in Euros, when the
spot rate is P52.50 per Euro. On December 31, HK reports net income of 30,000 EU. The weighted
average exchange rate for the year is P52 and the closing exchange rate on December 31 is P53. Match
each item to a choice:

Answer:

Dividends received from HK will be recorded as = Credit Dividends in Italia P13,125

What are the accounts affected by the above transaction and by how much? = Loans Payable P235,294

13. On November 1, 2021, Chimmy purchased inventory ay 400,000 FCU from a foreign supplier to
be settled on March 1. On the same date, it entered into a forward contract to hedge the
exposed liability. The forward rate is P0.90 per unit of foreign currency. Spot rates on November
1 is at P0.93, December 31 at P0.91 and March 1 at P0.94. Match each item to a choice:

Answer:
What will be the adjusted balance in the Acceptance Payable account on December 31? = 360,000

How much gain or loss was recorded as a result of the adjustment on December 31? = 8,000 gain

14. On april 10, 2022 Proof entered into a foreign forward contract to purchase 200,000 FCU on
June 10, 2022 to hedge a purchase of inventory last February 10, 2022.

What amount of forex gain (loss) from this forward contract should be recognized on June 10, 2022?
Select the correct response

Answer: 6,000 loss

15. Which of the following if not included in the computation of Cost of Goods identified with HO
Sales will result to overstatement of COGS? Select the correct response

Answer: Shipments to Agency

16. The realized profit on merchandise sold by the branch is P5,000. Ending inventory was P10,000
wherein P2,500 is from outside suppliers. The HO billed the branch at 125% of cost. Closing
entries will include. Select the correct response

Answer: Debit to Allowance for Overvaluation of Branch Inventory of P5,000

17. What amount of the forex gain (loss) from this forward contract should be recognized on June
10, 2022? Select the correct response (TABLE)

Answer: 6,000 loss

18. Yolo Corporation shipped merchandise worth P95,000 its Molo branch at cost. Molo has sales of
P120,000 and operating expenses of P20,000. Home Office Current has a balance of P40,000 and
ending inventory of P38,000. What is the correct balance of the Branch Current account in the
books of the home office? Select the correct response

Answer: 83,000

19. Tree Corp. Ships to its Leaf Branch merchandise costing P120,000. 75% of these were sold by the
branch for P141,000. Operating expenses of the branch amounted to P27,000. How much total
comprehensive income will the branch report if merchandise is billed by HO to branch at 125%?
Select the correct response.

Answer: 1,500

20. Which of the following statements is false? Select the correct response

Answer: Shipments to branch is added to the home office’s purchases account in determining the cost of
goods sold

21. Exposure of changes in cash flows attributable to certain risks associated with a recognized asset
or liability. Select the correct response.

Answer: Cash flow hedge

 22. Nice Co. has a sales agency in Iloilo in which a separate account is maintained. The home office
paid P5,000 for the rental on behalf of the agency. Which of the following will be part of the
entries of the Home Office? Select the correct response.

Answer: Debit to Rent Expense – Iloilo Agency

23. Pony has the following expenses stated in Foreign Currency. Depreciated of 120,000 for asset
acquired in January 2022, doubtful accounts expense of 80,000 and rent expense of 200,000.
The exchange rates at various dates were as follows: January 2022 at P0.40, December 2022 at
P0.50, and average and average for year ended December 2022 is P0.44. What total peso
amount should be included in Pony’s 2022 consolidated statements of CI to reflect the
expenses? Select the correct response

Answer: P183,200

24. The Branch Current Account in the home office books had a debt balance of P430,000 at
December 31, 2020. The reciprocal accounts were equal at the beginning of the year. Determine
the unadjusted balance of the Home Office accounts in the branch’s books at December 31,
2020 given the following:
a. The branch has not taken up its share of P9,000 for advertising expense
b. Merchandise shipped by HO at P3,600 was taken by the branch at P3,000
c. The home office erroneously recorded as remittance of P5,500 from V Branch when it was from
JK Branch. Select the correct response

Answer: 424,500

25. On March 1, 2022, Obi purchased merchandise worth 100,000 foreign suppliers payable witihin
30 days. Obi paid the note on March 31. The following are the spot rates: (Table)

Obi’s foreign exchange gain or loss on the transaction is: Select the correct response

Anwer: P12,000

26. On Dec. 31, 2021, the Home Office Account in ZL Branch has a balance of P75,000. The
differences with the HO current account in ZL Branch may be due to:
1. Home office inventory shipment to the branch on December 20 recorded by the branch in
January, 2022 at cost of P30,000
2. Inventory costing P45,000 was sent to the branch by the home office on December 27. The
billing was at cost, but the branch recorded the transaction at P48,200
3. P8,00 branch remittance to the home office in December was recorded on the HO books on
January 2022
4. P12,500 marketing expenses incurred by the home office of which P5,000 is allocated to the
branch. The branch has not recorded this transaction.

What is the reconciled amount of the Home Office and Investment in Branch Accounts? Select the
correct response

Answer: 106,800

27. An exchange rate of P1 to 25 Korean Won Select the correct response

Answer: Means that each won is worth 25 peso