MCQs

1. The following are ways of conducting foreign activities

Engaging in foreign currency-denominated transactions

having foreign operations

sending personnel abroad for training and conferences

a and b

2. According to PAS 21, a reporting entity is

required to identify its functional currency

encouraged to identify its fuctional currency

required to identify its presentation currency

a and c

3. According to PAS 21, a reporting entity

shall have only one functional currency

shall have only one presentation currency

may present its financial statements using any presentation currency it wishes

a and c

4. An entity's functional currency is

the currency of the primary economic environment in which the entity operates

the currency on which the financial statements have been prepared

the currency in the domicile country of the entity

all of these

5. The factors determining functional currency includes all of the following, except

the currency that mainly affects the entity's sales

the currency that mainly affects the entity's cost of sales

the currency used in the entity's financing activities and operating activities

the currency used in the entity's investing activities

6. In preparing consolidated financial statements of a Philippine parent company with a foreign subsidiary, the foreign subsidiary's functional currency is the currency

In which the subsidiary maintains its accounting records

Of the country in which the subsidiary is located

Of the country in which the parent is located

Of the environment in which the subsidiary primarily generates and expends cash

7. On December 20, 20x1, Juan Co., acquired inventory from Joe Co., an unrelated foreign entity. Payment is due on January 4, 20x2. Juan Co., uses a calendar year period. If Juan Co., appropriately did not recognize any foreign exchange gain or loss in its 20x1 profit or loss, what could have been the most likely reason?

The change in exchange rates as of the end of the reporting period is deferred and is recognized only in 20x2

The change in exchange rates is recognized in other comprehensive income

Juan is wholly owned subsidiary of Joe

The transaction is denominated in Juan's functional currency.

8. It is a financial instrument or other contract that derives its value from the changes in value of some other underlying asset or other instrument

Embedded derivative

Financial asset

Derivative

All of these

9. Which of the following is not among the characteristics of a derivative?

It must have at least two or more notional amounts

Its value changes in response to the change in an underlying

Requires no initial net investment or a very minimal initial net investment

It is settled at a future date

10. Which of the following can be an underlying for a derivative?

Temperature or climate

Specified Price

Interest or exchange rate

All of these

11. Which of the following can be a notional amount for a derivative?

Share price

Interest rate

Number of currency units

Exchange rate

12. Derivatives are obtained

As hedging instrument to hedge some kind of risk

for speculation

either a or b

neither a or b

Solving

1. Silver Spoon Co., acquired fixed asset for $36,000 on November 1, 20x1 when the exchange rate was $1.00 = P23.00. At December 31, 20x1, the entity's year-end, the supplier of the fixed asset has not been paid and the exchange rate at the time was $1.00=P25.00. On the December 31, 20x1 statement of financial position, what will be the values for the fixed asset and the creditor who was unpaid?