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6727 Statement of Financial Position

The document contains a sample CPA exam with 7 multiple choice questions related to financial accounting and reporting. It tests concepts such as calculating total current assets and liabilities based on financial statement line items provided, related party disclosures, shareholders' equity, and adjusting events after the reporting period.

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307 views3 pages

6727 Statement of Financial Position

The document contains a sample CPA exam with 7 multiple choice questions related to financial accounting and reporting. It tests concepts such as calculating total current assets and liabilities based on financial statement line items provided, related party disclosures, shareholders' equity, and adjusting events after the reporting period.

Uploaded by

Jane Valencia
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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CPA REVIEW SCHOOL OF THE PHILIPPINES

Manila
Financial Accounting and Reporting 6727
STATEMENT OF FINANCIAL POSITION

1. An entity reported the following current assets on December 31, 2020:


Cash in bank 4,000,000
Accounts receivable 7,000,000
Notes receivable 2,500,000
Note receivable discounted ( 400,000)
Inventory 4,500,000
Financial asset – FVPL 1,000,000
Financial asset – FVOCI 1,500,000
Prepaid expenses 200,000
Deferred tax asset 2,500,000
Equipment classified as “held for sale” 2,000,000
Total 24,800,000

Customers’ accounts 5,000,000


Allowance for doubtful accounts ( 500,000)
Sales price of unsold goods out of consignment at 125% of cost and excluded
from the ending inventory 2,500,000
Net accounts receivable 7,000,000

What amount should be reported as total current assets on December 31, 2020?

a. 18,300,000
b. 22,800,000
c. 20,800,000
d. 20,300,000

2. An entity provided the following information on December 31, 2020?

Accounts payables 2,000,000


Accrued expenses 800,000
Bonds payable due December 31, 2021 2,500,000
Premiums on bonds payable 300,000
Deferred tax liability 500,000
Income tax payable 1,100,000
Cash dividend payable 600,000
Share dividend payable 400,000
Note payable 6% - due March 1, 2021 1,500,000
Note payable 8% - due October 1, 2021 1,000,000

The financial statements for 2020 were issued on March 31, 2021. On March 1, 2021, the 6% note
payable was refinanced on a long-term basis. Under the loan agreement for the 8% note payable, the
entity has the discretion to refinance the obligation for atleast twelve months after December 31,
2020. What amount should be reported as total current liabilities?

a. 8,500,000
b. 9,800,000
c. 8,800,000
d. 9,200,000

3. An entity was incorporated on January 1, 2020 with proceeds from the issuance of P5,000,000 in
shares and borrowed funds of P1,000,000. During the first year of operations, revenue from sales
amounted to P8,000,000 and operating costs and expenses totaled P6,000,000. On December 15, the
entity declared a P500,000 cash dividend, payable to shareholders on January 15, 2021. No additional
activities affected owners’ equity in 2020. The liabilities increased to P1,800,000 by December 31,
2020. What amount should be reported as total assets on December 31, 2020?

a. 8,300,000
b. 8,800,000
c. 7,000,000
d. 6,800,000 6727
4. An entity provided the following information on December 31, 2020:

 Accounts payable amounted P1,500,000.


 On December 15, 2020, the entity declared a cash dividend of P20 per share on 100,000
outstanding shares, payable on January 15, 2021.
 On July 1, 2020, the entity issued P5,000,000, 8% bonds for P4,400,000 to yield 10%. The
bonds mature on June 30, 2025 and pay interest annually every June 30.
 The pretax financial income was P8,500,000 and taxable income was P6,000,000. The difference
is due to P1,000,000 permanent difference and P1,500,000 taxable temporary difference to
reverse 2021. The income tax rate is 30%. The entity made estimated income tax payments
during the current year of P1,000,000.

What amount should be reported as total current liabilities on December 31, 2020?

a. 3,700,000
b. 5,500,000
c. 4,700,000
d. 4,500,000

5. An entity reported the following data on December 31, 2020:

Cash in bank, net of bank overdraft of P100,000 1,200,000


Petty cash, including unreplenished petty cash expenses P10,000 50,000
Accounts receivable, net of customers’ account with credit balances of P200,000 2,000,000
Inventory, excluding unrecorded purchase of P300,000 on account in transit
shipped FOB shipping point on December 31, 2020 2,500,000
Deferred charges 150,000
Accounts payable, net of suppliers’ accounts with debit balances of P400,000 3,000,000
Note payable, with annual installment of P500,000 payable every December 31 2,000,000
Accrued expenses 300,000

1. What amount should be reported as total current assets on December 31, 2020?

a. 6,740,000
b. 6,750,000
c. 6,890,000
d. 6,440,000

2. What amount should be reported as total current liabilities on December 31, 2020?

a. 4,800,000
b. 6,300,000
c. 4,200,000
d. 4,500,000

6. Parent company acquired 100% of Subsidiary Company prior to 2020. During 2020, the individual
entities included in their financial statements the following:

Parent Subsidiary
Key officers’ salaries 750,000 500,000
Officers’ expenses 200,000 100,000
Loans to officers 1,250,000 500,000
Intercompany sales 1,500,000

What total amount should be reported as related party disclosures in the notes to the 2020
consolidated financial statements?

a. 4,500,000
b. 1,250,000
c. 1,750,000
d. 3,000,000

6727
7. An entity provided the following information at year-end:

Preference share capital, at par 2,000,000


Ordinary share capital, at par 3,000,000
Share premium 1,000,000
Sales 10,000,000
Total expenses 7,800,000
Treasury shares at cost – ordinary 500,000
Dividends 700,000
Retained earnings – beginning 1,000,000

What total shareholders’ equity should be reported at year-end?

a. 8,000,000
b. 8,500,000
c. 5,800,000
d. 8,700,000

8. The end of reporting period of an entity is December 31, 2020 and the financial statements for
2020 are authorized for issue on March 31, 2021.

 The entity had equity investments held for trading. On December 31, 2020, these investments
were recorded at the fair value of P5,000,000. During the period up to February 15, 2021,
there was a steady decline in the fair value of the shares in the portfolio and on February
15, 2021 the fair value had fallen to P2,000,000.
 The entity had reported contingent liability on December 31, 2020 related to court case in
which the entity was the defendant. The case was not heard until the first week of February
2021. On March 1, 2021, the judge handed down a decision against the entity. The judge
determined that the entity was liable to pay damages and costs totaling P3,000,000.
 On December 31, 2020 the entity had accounts receivable from a large customer in the amount
of P4,000,000. On March 15, 2021, the entity was advised in writing by the liquidator of the
said customer that the customer was insolvent and that only 10% of the accounts receivable
will paid on December 21, 2021.

What total amount should be reported as “adjusting events” on December 31, 2020?

a. 6,600,000
b. 7,000,000
c. 9,600,000
d. 0

Key to correction: DCADA ADAA

6727

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