1

CHAPTER 17
SUGGESTED ANSWERS
Exercise 17 - 1
Jan.

Mar.

May

5 Purchases
Accounts Payable
70,000 x P25.56

1,789,200

9 Purchases
Accounts Payable
100,000 x P.1678

16,780

10 Accounts Payable
Foreign Exchange Gain or Loss
Cash
70,000 x P25.60 = P1,792,000
16 Accounts Payable
Foreign Exchange Gain or Loss
Cash
100,000 x P.1550

1,789,200

16,780
1,789,200
2,800
1,792,000
16,780
1,280
15,500

Exercise 17 -2
Mar.

Apr.

14 Merchandise Inventory
Accounts Payable
20,000 x P52.85

1,057,000

10 Merchandise Inventory
Accounts Payable
60,000 x P.7637

45,822

14 Accounts Payable
Foreign Exchange Gain or Loss
Cash
20,000 x P52.75
May

10 Accounts Payable
Foreign Exchange Gain or Loss
Cash
60,000 x P.8125

1,057,000

45,882
1,057,000
2,000
1,055,000
45,822
2,928
48,750

Exercise 17 - 3
May

22 Accounts Receivable
Sales
10,000 x P5.4085
31 Accounts Receivable
Sales

54,085
54,085
8,516
8,516

Chapter 17 - Suggested Answers

page 2

40,000 x P.2129
June

22 Cash
Foreign Exchange Gain or Loss
Accounts Receivable
10,000 x P5.5015 = P55,015

55,015
930
54,085

30 Cash
Foreign Exchange Gain or Loss
Accounts Receivable

8,540
24
8,516

Exercise 17 -4
Jack Company
Income Statement
For the Year Ended December 31, 2006
Italian
Lira
300,000
200,000
100,000
55,000
45,000

Sales
Cost of goods sold
Gross profit
Operating expenses
Net income

Cash
Accounts receivable
Inventories
Land
Building, net
Machinery, net
Total assets

Bell Company
Balance Sheet
December 31, 2006
Assets
Italian
Lira
9,500
25,000
30,000
40,000
85,500
22,500
212,500

Translation
Rate
.51168
.51168
.51168

Translation
Rate
.51278
.51278
.51278
.51278
.51278
.51278

Philippine
Peso
153,504
102,336
51,168
28,142
23,026

Philippine
Peso
4,872
12,820
15,383
20,511
43,843
11,538
108,967

Liabilities and Stockholders' Equity

Accounts payable
Long-term debt
Common stock
Retained earnings
Translation adjustment
Total liabilities and stockholders' equity
Supporting computations:
A.

Common stock
110,000 x .50859
5,000 x .50732

15,000
50,000
115,000
32,500
______
212,500

55,945
2,537

.51278
.51278

7,692
25,639
58,482
16,632
522
108,967

Chapter 17 - Suggested Answers

page 3

58,482
B.

Retained earnings
Italian
Lira
-----45,000
(12,500)
32,500

Beginning balance
Net income
Dividends
Ending balance
B.

Translation
Rate
.51168
.51155

Philippine
Peso
-------23,026
( 6,394)
16,632

Translation adjustment
Net assets, beginning
Add (deduct):
Net income
Dividends
Common stock issued
Net assets, end - before adjustment
Net assets, end - after adjustment
Translation adjustment

Italian
Lira
110,000

Translation
Rate
.50859

45,000
( 12,500)
5,000
147,500
147,500

.51168
.51155
.50732
.51278

Philippine
Peso
55,945
23,026
( 6,394)
2,537
75,114
75,636
522

Exercise 17 - 5
Nona Company
Balance Sheet
December 31, 2006
Assets
US
Dollars
105,000
170,000
100,000
50,000
425,000

Cash
Accounts receivable
Land
Building, net
Total assets

Translation
Rate
55.50
55.50
55.50
55.50

Philippine
Peso
5,827,500
9,435,000
5,550,000
2,775,000
23,587,500

Liabilities and Stockholders' Equity

Accounts payable
Long-term debt
Common stock
Retained earnings
Translation adjustment
Total liabilities and stockholders' equity

10,000
155,000
225,000
35,000
______
212,500
Nona Company
Income Statement
For the Year Ended December 31, 2006

Revenue
Operating expenses

US
Dollars
355,000
250,000

55.50
55.50
56.50

Translation
Rate
56.00
56.00

555,000
8,602,500
12,712,500
1.977,500
260,000
23,587,500

Philippine
Peso
19,880,000
14,000,000

Chapter 17 - Suggested Answers

page 4

Net income
B.

105,000

Retained earnings
US
Dollars
-----105,000
(70,000)
35,000

Beginning balance
Net income
Dividends
Ending balance
B.

5,880,000
Translation
Rate
56.00
55.75

Philippine
Peso
-------5,880,000
( 3,902,500)
1,977,500

Translation adjustment
Net assets, beginning
Add (deduct):
Net income
Dividends
Net assets, end - before adjustment
Net assets, end - after adjustment
Translation adjustment

US
Dollars
225,000

Translation
Rate
56.50

Philippine
Peso
12,712,500

105,000
( 70,000)
260,000
260,000

56.00
55.75

5,880,000
( 3,902,500)
14,690,000
14,430,000
260,000

55.50

MULTIPLE CHOICE
17-A

1.
2,
3.
4.

A
A
A
B

5.
6.
7.
8.

C
D
D
B

17-B

1.

250,000 yen x (P.22- P.19)

P7,500 gain

17-C

1.

P480,000 P560,000 =

P80,000 loss

17-D

1.

Foreign exchange transaction loss on:

Payment of purchases (P960,000 - P900,000)
Principal amount of loan
(P5,200,000 P5,000,000)
Interest on loan (P260,000 - P250,000)
Total

P 60,000
200,000
10,000
P 270,000