CHAPTER 18

Exercise 1
a) From the viewpoint of the US enterprise the expression used is the direct quotation.

b) (50,000 x .0156)= 790

Exercise 2
11/15 Equipment 350,000
AP 350,000
11/20 AP 350,000
Forex Loss 23,333
NP (14,000/.0375) 373,333
Bank Charges 5,000
Cash 5,000
12/31 NP 62,222
Forex gain 62,222
Interest Expense 6,377
Interest Payable 6,377
(14,000 x.18 x 41/360)=287 /045=
311,111-373,333

1/19 Forex Loss 18,301

NP 18,301
14,000/.0425=329,412-311,111

Forex Loss 376

Int.Payable 376
287/.0425=6,753-6378
NP 329,412
Int Payable 6,753
Int. Exp. 3,129
14,000 x .18 x 19/360= 133/.0425
Cash (329,412 + 9882) 339,294

Exercise 3
12/15 NR 150,000 x .0390 5,850
Sales 5,850
12/31 Int. Rec. 29.25
150,000 x .12 x 16/360=800 x .03925
Int. Income 29.25
NR 37.50
Forex Gain 37.50
150,000 (.0390-.03925)
1/14 NR 37.50
ForexGain 37.50
150,000 (.0395-.03925)
Int. Rec. 2.35
Forex Gain (31.60-29.25) 2.35
Cash (151,500x.0395) 5,984.25
NR 5,925.00
Int. Rec. 31.60
Int. Income 27.65
Exercise 4
1/23 Marginal Deposit 210,040
Bank Service Charge 10,502
Cash 220,542
2/23 Purchases 412,620
Acceptance Payable 412,620
Acceptance Payable 412,690
Marginal Deposit 210,040
Cash 202,650

Exercise 5
12/23 Equipment (50T x 6.1098) 305,490
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 Accounts Payable 305,490

12/31 Forex Loss(6.275-6.1098)50T 8,110

Accounts Payable 8,110

2/06 Accounts Payable (6.275 x 50 313,750

Forex Loss 3,630
Cash (6.3476 x 50T) 317,380

Exercise 6
12/23 Foreign Currency Due from broker 330,490
Liability for Forward Contract 330,490

12/31 FC due from Broker 3,260

Forex Gain 3,260

2/6 Forex Loss 16,375

FC due from Broker 16,375
(63,435-6.675)50,000

Liability for Forward Contract 330,490

Cash 330,490

Cash 317,380
FC due from Broker 317,380

Loss minimized by P25,000 (330,490-317,380)

If No Hedging P11,740
W/ Hedging P25,000

Exercise 7
8/6 Merchandise (.028 x 80T) 2,240
Accounts Payable 2,240

Foreign Currency Due From Broker 2,480

Due to Broker 2,480
.031 x 80T

8/31 Forex Gain or Loss (.030-.028) 160

Accounts Payable 160

Foreign Currency Due from Broker 160

Forex Gain or Loss (.033-.031) 160

9/5 Forex Gain or Loss 280

Accounts Payable (.030-.0335) 280

Liability for Forward Contract 2,480

Cash (.031) 2,480

Foreign Currency (.0335) 2,680

Foreign Currency Due Fr Broker (.033) 2,640
Gain on Currency Exchange 40

Exercise 8
11/23 Accounts Receivable (.007943 x 1M) 7,943
Sales 7,943

Due From Broker (1 m x .008558) 8,558

Liability for Foreign Currency 8,558

12/31 Forex Gain or Loss 32

Accounts Receivable (.007911-.07943) 1M 32

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 Liability for Foreign Currency Sold 176
Forex Gain or Loss (.008558-.008382) 1M 176

1/22 Loss on Currency Exchange 31

Accounts Receivable (.007911-.00788) 31

Liability for Foreign Currency Sold 8,382

Loss on Currency Exchange 25
Foreign Currency 7,880
Forex Gain 502

Cash 8,558
Due From Broker 8,558

Exercise 9
3/31 Investment in Forward Contract 25,000
Due to Broker (100T x .25) 25,000

4/30 Loss on Investment (.25-.24)100T 1,000

Investment in Forward Contract 1,000

5/30 Due to Broker 25,000

Cash 25,000

Cash (.245 x 100T) 24,500

Investment in Forward Contract 24,000
Gain on Currency Exchange 500
Exercise 10
6/15 Cash 24,750
Investment in Foreign Currency 24,500
Forex Gain 250
Exercise 11
12/1 Foreign Currency Receivable 135,000
Liability for Forward Contract 135,000

12/31 Foreign Currency Receivable 1,000

Gain on Forward Contract (.612-.608) 1,000

Forex Gain or Loss 1,000

Change in Value of Purchase Commitment 1,000
1/30 Foreign Currency Receivable 100
Foreign Currency Receivable 100
Forex Loss 100
Change in Value 100
Purchases 135,000
Change in Value 1,100
Accounts Payable 136,100

3/2 Liability for Forward Contract 135,000

Cash 135,000

Foreign Currency 136,900

Foreign Currency Receivable 136,100
Forex Gain 800

Accounts Payable 136,100

Forex Loss 800
Foreign Currency 136,900

Exercise 12
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 a. Not hyper b. Hyper
Accts Recble 480,000 480,000
Notes Recble 720,000 720,000
Inventories 240,000 240,000
Building 2,400,000 (50,000 x 225-105) x 48 2,742,857
105
Acc. Dep. (48,000) (10,000 x 225-105) x 48 (548,571)
105
3,360,000 3,634,286

Exercise 13

b. 1,800,000 (4,000,000 x 4.5)

a. 1,760,000 (4,000,000 x 4.40)

Exercise 14. a) TRIAL BALANCE

SEA CORPORATION
Dec 31, 2010
Rands Dollars
Cash 62,000 1.20 744,000
Accounts Receivable 300,000 1.20 360,000
Airplanes 5,600,000 1.20 6,000,000
Depreciation 150,000 1.15 172,500
Other Expenses 140,000 1.15 161,000
Dividends 20,000 1.185 23,700
6,230,000
Accumulate Depreciation 30,000 1.20 36,000
Notes Payable 2,000,000 1.20 2,400,000
Capital Stock 1,000,000 .80 800,000
Retained Earnings 1/1 2,900,000 2,330,000
Revenues 300,000 1.15 ________ 345,000
Total 6,230,000 7,461,200 6,235,000
Transaction Adjustment ________ 1,226,200
7,461,200 7,461,200

b) Net Income (34,500-172,500-161,000) = P11,500

c) Assets (744,000+360,000+6,000,000-360,000) = P6,744,000

Notes Payable 2,400,000

SHE (800,000+2,330,000-23,700+11,500) 3,117,800
Translation Adjustment 1,226,200

d) Investment in Stocks, Sea 9,200

Income from Subsidiary 9,200

e)
Income from Subsidiary 9,200
Investment in Stocks, Sea 9,760
Dividends, Sea Corp. 18,960
Share Capital (1,000,000x.8) 800,000
Retained Earnings 2,330,000
Goodwill 861,500
Investment 3,193,200
NCI 798,300

Table:
100% 80% 20%
3,437,500 2,750,000 687,500
(3,220,000x.8) 2,576,000 2,060,800 515,200
861,500 689,200 172,300

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 Net Assets Beg. 3,130,000
Net Assets End (6,744,000-2,400,000) 4,344,000
Increase in Net Assets 1,214,000
Decrease in RE (23,700-11,500) (12,200)
Translation Adjustment P1,226,200

Exercise 15 American Sea Debit Credit NCI Consolidated

Income Statement
Revenues 945,000 345,000 1,290,000
Expenses (312,000) (276,000) ( 588,000)
Subsidiary Income 55,200 47,200
Minority Interest ________ ________ 13,800 ( 13,800)
Net Income 688,200 69,000 688,200

Retained Earnings
Beginning Balance 400,000 274,000 c) 266,400 66,600 400,000
Net Income 688,200 69,000 a)(59000)47200 13,800 688,200
(11,800) ________
Ending Balance 1,088,200 343,000 68,600 1,088,200

Financial Position:
Cash 133,200 72,000 205,000
Accounts Receivable 250,000 120,000 370,000
Allowance ( 25,000) ( 12,000) ( 37,000)
Investment In Sea c)268,000
Airplanes 750,000 600,000 1,350,000
Notes Receivable 224,000 _______ b)224,000 ________
Total 1,608,200 780,000 1,888,200

Notes Payable 220,000 240,000 b)240,000 220,000

Capital Stock 300,000 80,000 c) 64,000 16,000 300,000
Retained Earnings 62,400 68,600 1,150,600
Translation Adj. _______ 117,000 ________ 16,000 84,600 84,600
Total 520,000 780,000 570,400 570,400 1,888,200

VENEZUELA INVESTE
Transaction of Financial Statement
May 31, Year 7
Income Statement
Net Sales @ .26 1,560,000
Cost of Expenses @ .26 1,040,000
Net Income 520,000
Statement of Retained Earnings
Balance, Jan. 1 @ .25 225,000
Add Net Income 520,000
745,000
Less Dividends @ .27 162,000
Balance Dec. 31 583,000
Balance Sheet
Current Assets @ .27 54,000
Plant Assets (net) @ .27 1,215,000
Other Assets @ .27 81,000
Total Assets 1,350,00
Current Liabilities
Long Term Debt @ .27 27,000
Common Stock @ .25 405,000
Paid In Excess of Par @ .25 125,000
Retained Earnings 150,000
Accumulated Translation Adjustment 583,000
Liabilities and Stockholders Equity 60,000
1,350.000

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MULTIPLE CHOICE

1. (.1302136 - .118375) X 2,500,00 = P29,594 Answer: D

2. 36,000 x 43 = P828,000
36,000 x 44.5 = P1,602,000 Answer: C

3. 1) 5,000,000 x .00175 = 8,750 Answer: C

2) 5,000,000 x .0018 = 9,000 Answer: D
3) (.00175 - .00185) x 5,000,000 = 500 Answer: B

4. 1) .00182 x 5,000,000 = 9,100 Answer: B

2) .0018 x 5,000,000 = 9,000 Answer: D
3) (.00182 - .00175) x 5,000,00 = 350 Answer: A
4) (.00185 - .00182) x 5,000,000 = 150 Answer: C

5. (.74 - .72) x 50,000 = 1,000 Answer: C

Gain (.74 - .72) x 50,000 = 1,000 Answer: E
Loss 1,000
0

6. Ranchero Problem
1) Answer: B 2) Answer: E 635,040 3) Answer: E 361,200

In Pounds Translation In Dollars

Trial Balance Debit Credit Debit Credit
Cash 55,00 1.68 92,400
Accounts Receivable 113,000 1.68 189,840
Inventories 89,000 1.68 149,520
Plant & Equipment 129,000 1.68 216,720
Accum. Depn. Plant & Equip. 8,000 1.68 13,440
Current Liabilities 167,000 1.68 280,560
Long Term Debt 48,000 1.68 80,640
Common Stock 100,000 1.90 190,000
Retained Earnings 45,000 103,950
Revenues 350,000 1.75 612,500
Cost of Good Sold 218,000 1.75 381,500
Depreciation 4,000 1.75 7,000
Other Expenses 70,000 1.75 122,500
Dividends 40,000 ______ 1.83 73,200 ________
718,000 718,000 1,037,680 1,281,090
Translation Adjustment _______ ______ 243,410 ________
Totals 718,000 718,000 1,281,090 1,281,090

7. 200,000 x .22 = 44,000 Answer: B

8. 240,000 / 6 = 40,000 Answer A

9. 7,200,000/10 = 720,000x.621 = P447,120 Answer A

10. Answer A

11. Answer A

12. Answer C

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