PROBLEM 2 (26-50)

Problem 2-26 (IAA)

Jewel Company reported the following current assets at year-end.
Cash and cash equivalents 3,200,000
Accounts receivable 1,420,000
Allowance for doubtful accounts 120,000
Inventory 2,800,000
Deferred charges 200,000
Employees account – current 240,000
Advances to subsidiary 260,000
Claim against shipper for goods lost in transit 200,000
Total current assets 200,000
What total amount should be reported as current assets?
a. 7,740,000
b. 7,780,000
c. 7,940,000
d. 8,200,000
Answer
Cash 3,200,000
Accounts receivable 1,420,000
Allowance for doubtful accounts 120,000
Employees’ accounts – currents 240,000
Claim against shipper for goods lost in transit 200,000
7,740,000
Problem 2-27 (PHILCPA Adapter)
Caticlan Company provided the following data on December 31, 2015
Cash including sinking fund of P500,000 for bond
Payable due on June 30, 2016 2,000,000
Notes receivable 1,200,000
Note receivable discounted 700,000
Accounts receivable-unassigned 3,000,000
Accounts receivable-assigned 800,000
Equity of assignee in accounts receivable assigned 500,000
Inventory, including P600,000 cost of goods in transit
Purchased FOB destination the goods were
Received on January 3, 2015 2,800,000
Allowance for doubtful accounts 100,000
What total amount of current assets should be reported on December 31, 2015.
a. 7,900,000
b. 8,400,000
c. 7,400,000
d. 7,700,000
Answer:
Cash 2,000,000
Note receivable 1,200,000
Note receivable discounted (700,000)
Accounts receivable – unassigned 3,000,000
Accounts receivable – assigned 800,000
Inventory (2,800,000-600,000) 2,200,000
Allowance for doubtful (100,000)
8,400,000
Problem 2-28 (IFRS)
Daria Company reported the following accounts at year-end
Inventory, including inventory expected in the
Ordinary course of operation to be sold
Beyond 12 months amounting to P700,000. 1,000,000
Trade receivable 1,200,000
Prepaid insurance 100,000
Financial assets held for trading 200,000
Financial assets at fair value through other
Comprehensive income 800,000
Cash 800,000
Deferred tax asset 300,000
Bank overdraft 250,000
What total amount should be reported as current assets at year-end?
a. 2,800,000
b. 2,550,000
c. 3,600,000
d. 2,100,000
Answer
Inventory 1,000,000
Trade receivable 1,200,000
Prepaid insurance 100,000
Financial assets held for trading 200,000
cash 300,000
2,800,000
Problem 2-29 (AICPA Adapter)
Mill Company reported the following account balances on December 31, 2015
Accounts payable 1,500,000
Bonds payable, due 2016 2,500,000
Discount on bonds payable 300,000
Dividend payable 800,000
Note payable, due 2017 2,000,000
What total amount should be reported as current liabilities?
a. 4,500,000
b. 5,100,000
c. 6,500,000
d. 7,800,000
Answer:
Accounts payable 1,500,000
Bonds payable 2,500,000
Discount on bonds payable (300,000)
Dividends payable 800,000
4,500,000
Problem 2-30 (AICPA Adapter)
Gar Company reported the following account balances on December 31, 2015:
Accounts payable 1,900,000
Bonds payable 3,400,000
Premium on bonds payable 200,000
Deferred tax liability 100,000
Dividend payable 500,000
Income tax payable 900,000
Note payable, due January 31, 2016 600,000
The deferred tax liability is based on temporary differences that reverse in 2017. On December 31, 2015,
what total amount should be reported as current liabilities?
a. 7,100,000
b. 4,300,000
c. 3,900,000
d. 4,100,000
Answer:
Accounts payable 1,900,000
Dividends payable 500,000
Income tax payable 900,000
Note payable 600,000
3,900,000
Problem 2-31 (PHILCPA Adapter)
Burna Company disclosed the following liabilities:
Accounts payable, after deducting debit balances
In suppliers’ accounts amounting to P100,000. 4,000,000
Accrued expense 1,500,000
Credit balances of customers accounts 500,000
Stock dividend payable 1,000,000
Claims for increase in wages and allowances by
Employees, covered in a pending lawsuit 400,000
Estimated expense in redeeming prize coupons 600,000
What total amount should be reported as current liabilities?
a. 6,700,000
b. 6,600,000
c. 7,100,000
d. 7,700,000
Answer:
Accounts payable (100,000+4,000,000) 4,100,000
Accrued expenses 1,500,000
Credit balances of customers’ accounts 500,000
Estimated expenses in redeeming prize coupon 600,000
6,700,000
Problem 2-32 (PHILCPA Adapter)
Gumamela Company provided the following data at year-end:
Trade accounts payable, including cost of goods
Received on consignment of P150,000. 1,350,000
Accrued taxes payable 125,000
Customers’ deposit 100,000
Manila company as guarantor 200,000
Bank overdraft 55,000
Accrued electric and power bills 60,000
Reserve for contingencies 150,000
What total amount should be reported as current liabilities?
a. 1,840,000
b. 1,740,000
c. 1,650,000
d. 1,540,000
Answer:
Trade accounts payable (150,000-1,350,000) 1,200,000
Accrued taxes payable 125,000
Customers’ Deposit 100,000
Bank overdraft 55,000
Accrued electric and power bills 60,000
1,540,000
Problem 2-33 (AICPA Adapter)
Mazda Company reported the following liability balances on December 31, 2015
10% note payable issued on October 1, 2014 maturing
October 1, 2016 2,000,000
12% note payable issued on March 1, 2014 maturing on
March 1, 2016 1,000,000
The 2015 financial statement were issued on March 31, 2016. The entity has the discretion to refinance
the 10% note payable for least twelve months after December 31, 2015 the 12% note payable was
refinanced on a long-term basis. What amount of the notes payable should be classified as noncurrent on
December 31, 2015?
a. 6,000,000
b. 4,000,000
c. 2,000,000
d. 0
Problem 2-34 (AICPA Adapter)
Willem Company reported the following liabilities on December 31, 2015:
Accounts payable 750,000
Short-term borrowings 450,000
Mortgage payable, current potion P600,000 3,500,000
Other bank loan, due june 30, 2016 1,000,000
The P1,000,000 bank loan was refinanced with a 5 year loan on January 15, 2016, with principal payment
due January 15, 2017. The financial statements were issued February 28,2016. What total amount should
be reported as current liabilities on December 31, 2015?
a. 1,150,000
b. 2,250,000
c. 1,250,000
d. 850,000
Problem 2-35 (IAA)
On December 31, 2015. Ace Company had P40,000,000 note payable due March 1, 2016. On December
31, 2015 the entity arranged a line of credit with the bank which allowed the entity to borrow up to
P35,000,000 at 1% above the prime rate for three years. On February 1, 2016, the entity borrowed
P25,000,000 from the bank and used P5,000,000 additional cash to liquidate P30,000,000 note payable.
The financial statement were issued on March 31, 2016. What amount of the note payable should be
reported as current liability on December 31, 2015?
a. 40,000,000
b. 10,000,000
c. 5,000,000
d. 0
Problem 2-36 (IAA)
Jam Company had P2,000,000 note payable due on march 1, 2016. The entity borrowed P1,500,000 on
December 31, 2015 which has a five-year term and used the proceeds to pay down the note payable and
used other cash to pay the balance at maturity. The financial statements were issued on March 31, 2016.
What amount of the note payable should be classified as current on December 31, 2015?
a. 2,000,000
b. 1,500,000
c. 500,000
d. 0
Problem 2-37 (IAA)
Cara Company provided the following information for the current year
January 1 December 31
Current assets 240,000 ?
Property, plant and equipment 1,600,000 1,700,000
Current liabilities ? 130,000
Noncurrent liabilities 580,000 ?
Working Capital of P92,000 remained unchanged from beginning to the end of current year. Net income
for the current year was P61,000 No dividends were declared during the current year and there were no
other changes in owners’ equity. What is the amount of noncurrent liabilities on December 31?
a. 310,000
b. 432,000
c. 580,000
d. 616,000
Answer:
Problem 2-38 (AICPA Adapter)
When preparing a draft of year-end statement of financial position. Mont Company reported net assets
totaling P8,750,000. Included in the asset were the following:
Treasury shares of Mont Company at cost which
Approximate- market value 250,000
Idle machinery 100,000
Cash surrender value of life insurance 150,000
Allowance for inventory writedown 50,000
What amount should be reported as net assets?
a. 8,500,000
b. 9,000,000
c. 8,450,000
d. 8,350,000
Answer:
Net assets 8,750,000
Treasury share 250,000
8,500,000
Problem 2-39 (AICPA Adapter)
Magnolia Company reported the following unadjusted current assets and shareholders’ equity at year-end
Cash 150,000
Investment in trading equity securities (including
750,000 cost of magnolia Company shares) 1,000,000
Trade accounts receivable 850,000
Inventories 370,000
Total shareholders’ equity 2,370,000
The investment and inventories are reported at cost which approximated market value. what amount
should be reported as total shareholders’ equity at year-end?
a. 5,000,000
b. 6,000,000
c. 5,250,000
d. 6,750,000
Answer
Share capital 5,000,000
Retained earnings 1,000,000
(750,000)
5,250,000
Problem 2-40 (PHILCPA Adapter)
Peach Company prepared a draft of the year-end statement o financial position. The draft statement
reported total assets of P4,375,000 which include the following:
Treasury share of Peach Company at cost, which
Approximate market value 120,000
Unamortized patent 56,000
Deferred charges 68,000
Cumulative translation loss 42,000
What amount should be reported as total assets?
a. 4,208,500
b. 4,213,000
c. 4,250,000
d. 4,225,000
Answer:
Assets 4,375,000
Treasury share (120,000)
Cumulative translation loss (42,000)
4,213,000
Problem 2-41 (AICPA Adapter)
Gold Company provided the following trial balance on June 30, 2015
Cash overdraft 100,000
Account receivable 350,000
Inventory 580,000
Prepaid expenses 120,000
Land classified as held for sale 1,000,000
Property, plant and equipment net 950,000
Accounts payable and accrued expenses 320,000
Share capital 250,000
Share premium 1,500,000
Retained earnings 830,000
3,000,000 3,000,000
Checks amounting to P300,000 were written to vendors and recorded on June 29, 2015 resulting in a cash
overdraft of P100,000. The checks were mailed on July 9, 2015. Land classified as held for sale was sold
for cash on July 15, 2015. The entity issued the financial statements on July 31, 2015.
1. What total amount should be reported as current assets?
a. 2,250,000
b. 2,050,000
c. 1,950,000
d. 1,250,000
2. What total amount should be reported as shareholders equity?
a. 2,580,000
b. 1,750,000
c. 1,330,000
d. 2,900,000
Problem 2-42 (AICPA Adapter)
Trey Company provided the following trial balance on December 31, 2015 which had been adjusted
except for income tax expense:
Cash 5,000,000
Accounts receivable net 8,000,000
Prepaid taxes 1,500,000
Inventory 6,000,000
Property, plant and equipment 17,000,000
Accounts payable 10,000,000
Share capital 20,000,000
Retained earnings 5,000,000
Foreign currency translation adjustment 2,500,000
Revenue 15,000,000
Expenses 10,000,000
50,000,000 50,000,000
During 2015, estimated tax payment of P1,500,000 were charged to prepaid taxes. The entity has not yet
recorded income tax expense. The tax rate is 30%. The accounts receivable included P3,000,000 due form
a customer. Special terms granted to this customer require payment in equal semiannual installment
ofnP500,000 every April 1 and October 1.
1. On December 31, 2015, what total amount should be reported as current assets?
a. 21,000,000
b. 18,500,000
c. 17,000,000
d. 19,500,000
2. On December 31, 2015, what amount should be reported as total retained earnings?
a. 10,000,000
b. 8,500,000
c. 5,750,000
d. 6,000,000
Problem 2-43 (PHILCPA Adapter)
Kabugao Company provided the following data on December 31, 2015
Cash in bank net of bank overdraft of P500,000. 5,000,000
Petty cash (unreplenished petty cash expenses P10,000) 50,000
Notes receivable 4,000,000
Accounts receivable net of accounts with credit balances
Of P150,000 6,000,000
Inventory 3,000,000
Bond sinking fund 3,000,000
Total current assets 21,050,000
Accounts payable net of accounts with debit balances of
P1,000,000 7,000,000
Notes payable 1,000,000
Bonds payable due June 30, 2016 3,000,000
Accrued expenses 2,000,000
Total current liabilities 16,000,000
1. What total amount should be reported as current assets on December 31, 2015?
a. 19,040,000
b. 20,040,000
c. 23,540,000
d. 24,040,000
2. What total amount should be reported as current liabilities on December 31, 2015
a. 19,000,000
b. 16,000,000
c. 15,500,000
d. 15,000,000
Problem 2-44 (AICPA Adapter)
Mint Company provided the following account balances on December 31, 2015, which had been
adjusted except for income tax expense
Cash 600,000
Accounts receivable net 3,500,000
Cost in excess of billing on long-term contracts 1,600,000
Billing in excess of cost on long-term contracts 700.000
Prepaid taxes 450,000
Property, plants and equipment, net 1,510,000
Note payable- noncurrent 1,620,000
Share capital 750,000
Share premium 2,030,000
Retained earnings unappropriated 900,000
Retained earnings restricted for note payable 160,000
Earnings from long-term contracts 6,680,000
Cost and expenses 5,180,000
All receivable on long-term contarcts are considered to be collectible within 12 months. During the year,
estimated tax payment of P450,000 were charged to prepaid tyaxes. The entity has not recorded income
tax expense. The tax rate is 30%.
On December 31, 2015, what amount should be reported as.
1. Total retained earnings?
a. 1,950,000
b. 2,110,000
c. 2,400,000
d. 2,560,000
2. Total noncurrent liabilities?
a. 1,620,000
b. 1,780,000
c. 2,320,000
d. 2,480,000
3. Total current assets
a. 5,000,000
b. 4,100,000
c. 5,700,000
d. 6,150,000
Problem 2-45 (AICPA Adapted)
Shaw Company provided the following trial balance on December 31, 2015 which had been adjusted
except for income tax expense.
Cash
675,000
Accounts receivable
2,695,000
Inventory
2,185,000
Property, plant and equipment
10,245,00
Accounts payable and accrued liabilities
1,800,000
Income tax payable
1,500,000
Deferred tax liability
750,000
Share capital
2,500,000
Share Premium
3,000,000
Retained earnings, January 1
3,350,000
Net sales and other revenue
15,000,000
Costs and expenses
10,000,000
Income tax expense
21,000,000
27,900,00
27,900,00
The accounts receivable included ₱1,000,000 due from a customer and payable in quarterly installments
of ₱125,000. The last payment is due December 30, 2017. During the year, estimated tax payment of
₱600,000 was charged to income tax expense. The income tax rate is 30%.
On December 31, 2015, what amount should be reported as:
1. Total current assets?
a) 6,030,000
b) 5,555,000
c) 5,530,000
d) 5,055,000
2. Total current liabilities?
a) 2,700,000
b) 3,300,000
c) 4,050,000
d) 3,450,000
3. Retained earnings?
a) 8,350,000
b) 7,750,000
c) 6,850,000
d) 6,250,000
Problem 2-46 (PHILCPA Adapted)
Camarines Company provided the following data on December 31, 2015:
Cash
2,000,000
Accounts receivable
3,000,000
Merchandise Inventory
1,900,000
Prepaid expenses
100,000
Trade accounts payable, net of debit balance of ₱50,000
2,450,000
Interest payable
150,000
Income tax payable
300,000
Money claims of the union, pending final decision
500,000
Mortgage payable, due in four annual installments
2,000,000
A review showed that the cash of ₱2,000,000 included cash in bank of ₱1,650,000, a customer's check of
₱100,000 marked NSF, an employee IOU of ₱50,000 and ₱200,000 deposited with the court for a case
under litigation.
The cash in bank of ₱1,650,000 is the balance per bank statement. On December 31, 2015, outstanding
checks amounted to ₱250,000.
The accounts receivable included the following:
Customer's debit balance
1,600,000
Advances to subsidiary
400,000
Advance to suppliers
200,000
Receivables from officers
300,00
Allowance for doubtful accounts
(100,000)
Selling price of merchandise invoiced at 120% of cost, undelivered and excluded from inventory
600,000
1. What amount should be reported as total current assets?
a) 6,050,000
b) 6,350,000
c) 5,550,000
d) 6,100,000
2. What amount should be reported as total current liabilities?
a) 3,450,000
b) 3,400,000
c) 3,950,000
d) 3,700,000
Problem 2-47 (IAA)
Petite Company provided the following data on December 31, 2015:
Cash
5,000,000
Financial assets at fair value through profit or loss
(including long-term investment of ₱500,000 in ordinary shares of Ayala Company)
2,000,000
Inventories (including goods received on consignment of ₱200,000)
800,000
Prepaid expenses (including a deposit of ₱50,000 made in inventories to be delivered in 18 months)
150,000
Property, plant and equipment (excluding ₱300,000 of equipment still in use but fully depreciated)
10,000,000
Goodwill
1,000,000
Total assets
18,950,000
Analysis of the cash account showed the following:
Cash in general checking account
3,500,000
Sinking fund set aside to retire bonds in 2017
1,000,000
Cash held to play value added taxes
500,000
5,000,000
What total amount of current assets should be reported on December 31, 2015?
a. 6,250,000
b. 6,200,000
c. 7,200,000
d. 7,250,000
Problem 2-48 (AICPA Adapted)
On December 31, 2015, Ivan Company showed the following current assets:
Cash
500,000
Accounts receivable
3,500,000
Inventory
2,000,000
Deferred tax asset
400,000
Prepaid expenses
100,000
Total current assets
6,500,000
Cash on hand including customer’s postdated check of ₱20,000 and employee IOU of ₱10,000
130,000
Cash in bank per bank statement (outstanding checks on December 31, 2015, ₱70,000)
370,000
Total cash
500,000
Customers’ debit balance, net of customers’ deposit of ₱50,000
1,900,000
Allowance for doubtful accounts
(150,000)
Sales price of goods invoiced to customers at 150% of cost on December 29, 2015 but delivered on
January 5, 2016 and excluded from reported inventory
750,000
Subscription receivable collectible currently
1,000,000
Total accounts receivables
3,500,000
What total amount should be reported as current assets on December 31, 2015?
a. 6,230,000
b. 5,830,000
c. 5,900,000
d. 5,800,000
Problem 2-49 (PHILCPA Adapted)
Daet Company provided the following account balances and related information on December 31, 2015:
Cash and cash equivalents
3,700,000
Accounts receivable
1,500,000
Allowance for doubtful accounts
(200,000)
Inventory
2,000,000
Prepaid insurance
300,000
7,300,000
 The cash and cash equivalents included the following:
Cash in bank . net of bank overdraft of ₱300,000 maintained in a separate bank
1,000,000
Cash set aside by the Board of Directors for the purchase of a plant site
2,000,000
Petty cash
10,000
Cash withheld from wages for income tax of employees
190,000
General cash
500,000
3,700,000
 The accounts receivable included past due account in the amount of ₱100,000 on which a loss of 50%
is anticipated. The account should be written off.
 The merchandise inventory included goods held on consignment amounting to ₱150,000 and goods of
₱200,000 purchased and received on December 31, 2015. Neither of these items had been recorded as a
purchase.
 The prepaid insurance included cash surrender value of life insurance of ₱50,000.
What total amount should be reported as current assets on December 31, 2015?
a. 5,400,000
b. 5,100,000
c. 5,300,000
d. 5,200,000
Problem 2-50 (AICPA Adapted)
Charice Company provided the following information on December 31, 2015:
 Accounts payable for goods and services purchased on open account amounted to ₱500,000 and
accrued expenses totaled ₱300,000 on December 31, 2015.
 On December 15, 2015, the entity declared a cash dividend of ₱7 per share, payable on January 15,
2016, to shareholders of record on December 31, 2015. The entity had 100,000 shares issued and
outstanding throughout 2015.
 On July 1, 2015, the entity issued ₱5,000,000, 8% bonds for ₱4,400,000 to yield 10%. The bonds
mature on June 30, 2020, and pay interest annually every June 30.
On December 31, 2015, the bonds were trading in the open market at 86 to yield 12%. The entity used the
effective interest method to amortize bond discount.
 The pretax financial income was ₱8,500,000 and taxable income was ₱6,000,000. The difference is
due to ₱1,000,000 permanent difference and ₱1,500,000 of taxable temporary difference which is
expected to reverse in 2016.
 The entity is subject to income tax rate of 30% and made estimated income tax payments during the
year of ₱1,000,000.
What total amount should be reported as current liabilities on December 31, 2015?
a. 3,500,000
b. 2,700,000
c. 2,300,000
d. 2,500,000
Problem 2-51 (IAA)
Kumaykay Company provided the following schedule of liabilities on December 31, 2015:
Accounts payable
6,500,000
Bank note payable – 10%
3,000,000
Bank note payable – 11%
5,000,000
Interest payable
150,000
Mortgage note payable – 10%
2,000,000
Bonds payable
4,000,000
 The ₱3,000,000. 10% note was issued March 1, 2015 payable on demand. Interest is payable every six
months.
 The one-year ₱5,000,000. 11% note was issued January 15, 2015. On December 31, 2015 the entity
negotiated a written agreement with the bank to replace the note with a 2-year, ₱5,000,000. 10% note to
be issued January 15, 2016.
 The 10% mortgage note was issued October 1, 2013, with a term of 10 years. Terms of the note gave
the holder the right to demand immediate payment if the entity fails to make a monthly interest payment
within 10 days from the date the payment is due.
On December 31, 2015 the entity is three-months behind in paying the required interest payment.
 The bonds payable are ten-year, 8% bonds issued June 30, 2006. Interest is payable semi-annually on
June 30 and December 31.
What total amount should be reported as current liabilities on December 31, 2015?
a. 15,650,000
b. 11,650,000
c. 20,650,000
d. 13,650,000