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490 views39 pagesValix Financial Accounting Volume 1
Uploaded by
Rein ConcepcionCopyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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GROSS PROFIT METHOD
RETAILMETHOD
FINANCIALASSETS AT FAIR VALUE
INVESTMENTIN EQUITY SECURITIES
INVESTMENT INASSOCIATE.
FINANCIALASSET ATAMORTIZED COST
INVESTMENTPROPERTY
FUNDAND OTHER INVESTMENTS,
DERIVATIVES
PROPERTY, PLANT AND EQUIPMENT
GOVERNMENT GRANT
LANDAND BUILDING
‘MACHINERY AND CAPITAL EXPENDITURE
BORROWING COST
DEPRECIATION
DEPLETION
REVALUATION
IMPAIRMENTOF ASSET
INTANGIBLEASSETS
GOODWILL ANDLEASEHOLD IMPROVEMENT
[RESEARCH AND DEVELOPMENT COST
355
370
380
ages
«0
2
sa
388
31
on
on
664
616
on
1
STATEMENT OF FINANCIAL POSITION
Problem 1-1 (IFRS)
“The general ledger trial balance of Darwin Company it
following ccounts on December 31,2013:
Inventory inctdingjnventory expected inthe ordinary
‘ouree of operations to be sald beyond L2 months
Sroounting o #700,000
Accounts eesivable
Propaid insurance
Financial assets eld for trading
Finanesal asset t fait value tough other
‘comprehensive meome
cash
Deferred tax asset
Bank overdraft
‘What amount should beepoctedas otal curent assets on December
3120137
2,800,000
2'550,000
50,000
00,000
Solution 1-1 Answera
cluded the
6.
é
laventory
Account eeeivable
Prepaid insurance
sae eld for trading
“Tota current assets
Inthe absence of statement the contrary, financial assets at a
value through other comprehensive income shal be elasifed 3s
noncurrent.PAS I and PAS 12 provide that deferred tax asset isa
‘oncurent asset The bank overdatselassified as current lability
1 Problem 1-2(AICPA Adapted)
Violago Company provided the following, account balances on
December 31,2013:
‘Accounts receivable 1.600009
Final asses at fair value through profit or loss
Financial assets at storized cost
Caen
Inventory 3.000.000,
Equipment and fureiture 2,300,000,
‘Aceinvleed depreciation 500.00
Patent “00,000
Prepaid expenses 100,000
gvipment classified as held forsale 2,900,000
Inthe December31, 2013 statement of financial position, what total
‘amt shouldbe reported as curent assets?
8 6,300,000
b. 8,300,000
€. 8,200,000
‘6. 94600,000
Solution 1-2 Answer
1,606,000
Financial ascts at fir value through profit or Boss 500,000
Cash 1,300,000
Inventory 00,c00
Prepaid expenses 109,000
Equipment classified a held forsale 2,000,000
‘Total curent assets 8,300,000
‘The financial assets at amortized cos shal beclassifed as noncurrent
Financial assets at amortized cost include investment inbonds andother
obs nsrument,
‘Under PFRS 5, a noncurrentaset lasted as eld forsale should be
reported as curent asset
Problem 1-3(1AA)
Pamela Company provided the following adjusted acoount balances
‘on December 31, 2013:
‘ages payable 250,000
Cash 200,000
Mortenge payable 1,500,000,
Dividends payable 150,000
Prepaid ret, 100,00
Inventory 800,000
Sinking fund 300,000
Shor-tecminvestments 200,000
Investment in associate 2,000,000
‘Taxes payable 20,000
Accounts payable 240,000
‘Accounts reeivable 350,000
‘What foal amount should bereported as cumentassets on December
31, 20137
a. 2,250,000
b. 1,750,000
© 3,750,000
d. 4250,000
‘Solution 1-3 Answer
cash 200,000
Prepaid rent 100,000
Teventory 00,000
Shor -teeminvestments 300,000
‘Accounts receivable 350,000
Toual current assets Problem 1-4 (AICPA Adapted)
Patte Company provide the flowing data onDecember’31, 2013:
cash 5,000,000
Financia assets at fai value (inelading
Torg-term investment of P500,000 in ordinary
shares of Ayala Company) 2,000,000
Teventories (including goods received on
‘consignment of ®200,000) 00,000
Prepaid eponses [including 2 deposit of P50,000 made
‘on inventories te delivered in 18 mots) 150,000
Property, pant nd equipment (excluding P300,000
‘of equipment still inuse but fly éeprecated) 1,000,000
Goouil (based on estimste by the presigen!) 009,000
‘otal assets
‘Cash in general checking account 350,000
‘Cash in fund tobe sed fe etre bonds 2015 1000200
Cash held to pay val aed taxes $00,000
Total cash 5,000,000
‘What total amount of cureat assets shouldbe reported on December
31,2013?
6,250,000
6,200,000
7,200,000
17250,000
Solution 1-4 Answer
cast 43,500,000 + 500,000) 4,000,000,
Financial assets (2,000,000 ~ 500,00), 1,300,000,
laventries (200,000 ~ 200,000), “co.000
Prepaid expenses (150,000 ~ 5,000) 100,000
‘oral current arsete
Problem 1-5 (1AA)
‘Cara Company provided the fellowing information:
wines 12312013
‘Curtent assets 240,000 2
Property, plan, and equipment 1,200,000 1,760,000
‘Guerentieiities 2 “139.000
‘Noncurent abilities 80,000 ”
Allasseisand abilities ofthe entity are reported at year-end. Working
‘capital of P92,000 remained unchanged from 2012 to 2013, Net
{income in 2013 ws P64,000. No dividends were declared during
2013 and here were nother changes in owners’ equi, What amount
‘should he reported as noneurert habilitiesomDecember’31, 2013?
340,000
482,000
580,000
616,000
Solution 1-5 Answer d
‘Current arse — January 1, 2012 240,000
Property, plant and equipment January 1,203 1,600,000
‘Total sstots— January 1, 2013 1.810.000
Current abilities (240.000 92,000) (188,000),
Noneureat abilities {.sse000),
Equity January 1, 2013, 12,000
Netineomein2013, si n0
Equity -Dovember 31, 2013, 1.176000
Curent asets = December 31,2013 (130,000 +92.000) 222,000
Proper plant 98 equipment = December 31,2013” 1,300,000
‘oval acets ~ December 3), 2013 reve)
Current liabilities ~ Doceasber 31,2013 130,000),
‘Noncuren lables ~ December 32,2013 (SQUEEZE) { 616,000)
Equity ~ December 3152013 Probiem 1-6 (AICPA Adapted)
Rice Company was incorporated on January 1, 2013, with
5,000,000 from theissuanceof share capital and borrowed funds
‘oF P1,500,000, During the firs yeas, net income was P2 500,000.
‘On December 15, the entity paid a P500,000 cash dividend. No
‘additional activities affected shareholders equity in 2013. On
December 31, 2013, the libilities had inereased to P1.300,000.
(On December 31,2013, what amount shouldbe reported as total
assets?
a. 6,500,000
', 9,300,000
© 800,000
4. 6,800,000
Solution 1-6 Answer
Labiites 1.800.000
‘Share capital 5,000,000
Retained earings (net income of P2,500,000
Tess dividends oF PS00,000), 2.000.000
‘Total bites and shareholders’ equity 8:30.00
Problem I-T (AICPA Adapted)
Min Company was incorporated cn January 1,2013, with proceeds
{rom the issuance of P7,500,000 in share capital and borrowed
funds of P1,100,000, During the frst year, revenue from sales and
consulting amounted to P8,200,000, and operating, costs and
‘expenses totaled P6,400,000, On December 15, 2013, the entity
\ecleted a P300,000 dividend, payable ta shareholders on January
15,2014. Noaational actives affecte sharcholdes equity in 2013
‘The libiltes increased 19 P2,000,000 by December 31, 2013.0n,
December 31,2013, what amouat should be reported as tal asets?
a. 11,000,000
b. 11,300,000
©. 10,100,000,
d. 12'100,000
Solution 1-7 Answer a
abies 2,000,000,
Share capital 7,300,000
Retaines eamings (8,200,006 400,000 ~ 300,000) 300.000
“Total ibiies and sarcholders” equity
Problem 1-8 (AICPA Adapted)
Gold Company provide followings baleneon Decne, 2013:
Cash overdraft 160.000
Accounts reeivabl, net 350,000
Inventory 580,000
Prepaid expenses 120.000
Land cassfied as held for sale 1,000,000
Property. plantand cquipment net 380,000
‘Accounts payable and scorwed expences 320,000
Qedinary share capital 250,000
‘Share premir 1,500,600,
Retained earnings $30,000
3,000,000 3,000,009,
Checks amounting to P300,000 were written to vendors and
recorded on December 28, 2013, esulting in acash overératt of
100,000, Thechecks were mailed on January 15,2014, Landeiasified
asheld for sale was sold for cash on Famuary 31, 2014 The entity
Jssued the financial statements on March 31, 2014. On December
31,2013, vhattotal amount should be reported as current assets?
a. 2,250,000
. 2'050,000
©. 1,950,000
4 1(250,000
Solution 1-8 Answer a
cash (300,000 ~ 100,000 overdrat)
‘Accounts receivable
Iaveniory
Prepaid expenses
and classified as held forsale
Total cvrrent assets Problem 1-9 (AICPA Adapted)
Arabian Company reported the following curent essetson December
31,2013
cash 4300000,
‘Accounts receivable 700.000
leveutory 400,000
Doferted tax asct 0
190-000
An analysis ofthe accounts receivable disclosed shat accounts
receivable comprised the following
Trade secounts receivable s.000.000
Allowance fordonbifl accounts (500,000),
Selling price of Arabian Company's unsolé goods sent
te Tar Company on consignment at 150% of cost
and excluded from Arabian's endinginventory 3,600,000,
7500.00
On December 31,2013, whet amount should be reported as total
16,000,000
15,300,000
©. 15;800,000
4 14;800,000,
Solution 1-9 Anewer a
cash 4300000
Accounts rcsivable 500.000
‘Allowance for doubiful accounts 500,000),
Inventory (4,000,000 + 2,000,000), 500.000
‘oral curent assets 4a00.000
‘Theselingprice ofthe unsok goods ot on consignment iexshided
Siomaccoums receivable but the costof the goods shall be inelode in
inventory The ctf god out on cosigamentis,000,000 vided
by 150% or P 2,000,000.
Problem 1-10 (PHTLCPA Adapted)
‘Catclan Company provided:he following data on December31,2013,
‘Cash including sinking fund of PS00,000 2.001.000
‘Notes receivable 120,000
Note eeeivable discounted “00,000
Accounts receivable unassigned 3,0,000
Accounts reeivable~ assigned 300,000
Equity of assignee in eccourts recsivable assigned 500,000
Inventory, including P600,000 cast of goods in tansit
‘Barchased FOB destination, The goods were
received on January 3, 2014 2,800,000
Allowance for doubtful secounts 100,000
‘What total amountofeurent assets howl be epertedinthe statement
of financial position on December 31,2013?
a. 7,900,000
». 8,000,000
©. 7,400,000
& 7,700,000
Solution 1-10 Answera
cath (2,004,000 ~509,000) 1,500,000,
‘Notes cooeivable 200.000
Note reeivabie discounted ec)
ivable~ unassigned 000,000
os 200,900
“Allowence for doubtful accounts (100,000)
Inventory {2,804,000 - 600,000) 200,600
‘Total current assets 2,900,000
‘The equity ofthe assignee in assigned accounts shall not be offset
against the assigned accounts receivable bat included in current
ibis. Problem 1-11 (AICPA Adapted)
(On December 31,2013, lan Company'showed the folowing ures
assets
cash 500,¢00
‘Accounts reeivable 200.000
Jventory
Prepaid expenses
‘Total eurent assets
(Cash on hand inching customers pstdsted check
‘of 720,000 and employce JOU af P1000 130.00
Cas in bank per bank statement (outstanding
‘ehecks on Deeziber 31,2013, P70,000) 370,000
‘Total cash em
Customers" debit balances, net of eistomers"
‘deposit of P50,000 1,900,000
Allowaace for doubtful aceounts 150,500),
Sales pres of poods invoiced 1 customers at 150%
‘of cost on Dacember 29,2013 bul delivered on
Sanuary 5, 2014 an excladed from reported
Fnvertory 50,000
‘otal account receivable 2.500.000
What tta amount ofcarrent assets should bereported on December
31,2013?
4, 400,000
b. 4,830,000
© 4780,000
4.630.000
Solution J-11 Answer b
Current assets per book
Outstanding checks
Customers" deposit
(Overststement of secounts receivable
‘Understatement of inventory (750,000 150%)
‘oval curont assets
Problem 1-12 (AICPAAdapted)
East Company reported the following curent assets a yearend
cash 3.200900
‘Accounts receivable 200,000
Inventory 2,300,000
Deferred charges . 00.000
sn
‘The accounsreceivable consisted ofthe following items
Customers? acsounts 1,320,000
Employees’ account current °a0;000
Advances to subsidiary 260,000
Allowance for uncollectibiewecaunts (120,000)
(Cain aghinst shipper for goods fost in transit 200,000,
2,900,000
‘What amount shouldbe reported astotal eurentassets?
7,740,000
7,780,000
7/940,000
4d. 8,200,000
Solution 1-12 Answera
cash 3,200,000
‘Accounts receivable 20,000
Allowance for unallectibieaeceunts (120,000)
Reocivabe rom employees 240,000
Claim ecciveble 200.000
Inventory 2.300.000
‘Total carent assets 2.340.000
‘Theedvancesto subsidiary shal be clasitied as oneurent investment
‘The defered charges are considered noncurrent becansetechnally
they expire in more than one year forthe endof reporting period Probtem 1-13 (PHILCPA Adapted)
‘Pact Company provided the following accoant balances and relatee
‘information on Decernber 31,2013
(Cash and ash equivalents 4 3,200000
Accounts eecivable 1,500,000
Allowance for dovbitel secouats 200,000),
Inventory 2,000,000,
Prepaid insurance 300,000
7,300,000
Cash in bank, net of bank overdraft of P200,000!
aetained in a separate bank 1,900,000
‘Cash set aside by the Board of Divectors forthe
purchase ofa plant site 2.000:000
Pent cash 10.00
Cash withheld from wages fr income tax ofemployees 190,000
‘Goncrs! cash 00.000
‘Total casa and ensh oquivalente 3,700,000
‘The accounts receivable included past due accouat inthe amount of
P (60,000. The account is deemed uncollectible and should be
ween off
‘The inventory included goods held on consignment amounting to
'P150,000 and goods of P200,000 purchased and received on
December 31, 2013, Neither ofthese items have been recorded as
purchase
‘The prepaid insurance included ash suender valu oflifeinsurance
of 50,000,
‘What total amount should be repored es curentassets on December
31, 20137
5,400,000
5,100,000
5,300,000
5'200,000
poge
n
Solution 1-13 Answer a
Current assets per boole 7300000
Bank overdraft “00.000
‘Cash st ase for plant site (2,000,200)
‘Goods eldon consignment (130,000)
(Cash surrender value
Adjusted current assets
Thebankoverafts not “netted” againstibe cash inbank butshould
beclssfed as current ability.
‘Thewriteotfofthe account receivable has efecton curent aces,
‘Thecash sunender valueisanoncaentinvestment
Problem 1-4 (AICPA Adapted)
Mill Company provided the following account balanees on December
31,2013
Accounts payable 1 500.000
Bonds payable, duc 2014 23300000,
Discount on bonds payable 300,000
Dividends payable 300,000
‘Note payable, due 2015 2,000,000
‘What otal amount of current liabilities shouldbe reported?
a. 4,500,000
». 5,100,000
©. 6,500,000
4. 7,800,000
Solution I-14 Answera
Accounts payable
Bonds payable
Discounton bonds payable
Dividends payable
‘oral eurrent ibis
B Problem 1-15 (AICPA Adapted)
Gar Company reported the following lability secount balances on
December 31,2013:
‘Accounts payable 1.900 000
Bonds payable 300,000
Premium on bonds payable 200,000,
Detered ta liability 400,000
Dividends payable 500,000
ocome tax payable 300,00
‘Note payable due January 31,2014 09.000
‘The deferred tax liability is based on temporary aiferences that wil)
reverse in 2015, In the December 31, 2013 statement of financial
position, what tral emeunt should berepocedas cure liabilities?
7,100,000
4'300,000
3900,000
4,100,000
poge
Selution 1-13 Answer e
‘Accounts payable 1,900,000
Dividends payable ‘00,000
Income tx payable
Note paya
‘Total coment liabilities
‘Under PAS 1 andPAS 12, defereed tax liabily shouldbe chssiied
asmoncurrent
Inthe absence of ay contrary statement, the bonds payable plus the
premium onbonds payable shouldbectassified asnoncucrent,
Problem -16(AICPA Adapted)
Brite Company had the following labilties on Deseraber3, 2013:
‘Accounts payable 550.000
‘Unseeured vote payable, 8%, de July 1, 2014 +4900;000,
Acerved expoases 330,000
Continget ability 450,000
Deferred tex lability 250,000
Senior bonds payable, 7%, due March 31,2014 000,000
‘What amount should be reporced as total current liabilities?
a. 10,350,000
‘10,150,000
fe. 9,900,000
4. 4,900,000
Solution 1-16 Answere
“Accounts payable 550,000
Unsecured note payable +4000,000,
Acerued expenses
Seniorbonds payable
‘Total carent
Problem I-17 (PHILCPA Adapted)
Burma Company disclosed the follwing labile:
‘Accounts payable after deducting debit balances
msupplices accounts amounting P 100,000
Acetued expenses
(Credit balances of customers” secounts
Stock-dividend payable
Cains for sncrease in wages and allowance by
“employees of the enity, covered Ins pending lawoult
‘stimated expenses in redeeming prize eoupons.
1.000
00,000
cx'e00
‘What amount should be reported as total current liabilities?
6.
i
77709,000
1s Solution 1-17 Answer
Accounts payable (4,000,000 + 190,000) 10000
‘Accrued expenses £500.00,
Credit balances in customers’ accounts 500.00
timated ability for coupons 600,00:
“otal curren iniiie 670000
“Thestock dividend payablets nan accountng liability but presentec
aspar of shareholders equity asa adkition to sare capita
Problem 1-18 (PHILCPAAdapted)
Gurmamela Company provided the following dataon December 31,
2013:
‘Trade accounts payable, including cos of goods
received on consignment of 150,000 1,350,000
Accrued taxes payable 125.00
Customers’ deposit 10,000
‘Gumamela Company as guarantor 200,000
Bank oven 35,000
Accrued electric and power bills 60,000
Resceve for contingencies 150,000
‘Whatamount should bereporied as tia current ibilites?
1,840,000
1,740,000,
11950:000,
1,540,000,
Solution 1-18 Answer d
‘Accounts payable (1,350,000 150,000.
‘Acerusd tence payable
Customers deposit
Bank overdraft
‘Accrusd eleetie nad power bills
“Tol cure lailiis
w
Problem 1-19 (AICPA Adapted)
Charice Company provides te following on December31, 2013
‘Accounts payable amounted to P500,000 andaceued expenses ovale
300,000 aR December 31, 2013,
On December 15,2013, te entity declared a cash dividend of P7 per
shareon 100,000 outstanding shares, payable on January 15,2014,
On July 1, 2013, the entity issued P5,000,000, 8% bonds for
'P4,400,000 to yield 103, The bonds mature on une 30, 2018, and
pay interest ansually every Sune 30.
‘The pretax financial income was PB 500,000 and taxableincagne Was
16,000,000. Te ference due PI, 000,000 permanent dierence,
and PI,$00,000 of taxable termporary difference ro reverse in 2014
“Tae income tax rate is 30%. The entity made estimated income tax
payments Gung the year ofP1,000,000,
‘What mount shouldbe repartedastotl cust ible on Deoember
31,2013?
a. 3,500,000
. 2'700,000
© 7300,000
500,000
Solution 1-19 Answer d
Accounts payable
Accrued expenses
Dividends payable (100,000x7)
Accrued interest payable (5,000,000 x 8% x 6/12)
Income fax payable
“Total cases lnbilties
Dursent tx expense (6,000,000 x 30%)
Estimsted tx payament|
Income tax payable
0 Problem 1-20 (AICPA Adzptod)
“Maza Company reported following tabi blances on Desembe
31,2013:
1% note paysbieissued on October 1,2012, maturing
‘October 1, 2614 000,000
12¥%note payable issued on March 1, 2012,maturing
‘onMateh 2014 4p00000
‘The 2013 financial statements weressoeen March, 2044 Uer
thelom arene rine (Pn paabeheetiy ha te eon
corcfinaoe te blgnion fra eat vcive rents afer Devember
31,2013. Or March 1, 2014 the entre 4,000,000 balan of he
12% not payable was efnanced through issuance of longterm.
chiigton payable tans. Wht sour of eros payable should
Se clssifiedarcurrenton Deceiber 31,2013?
6.000000
5. 000000
©. 2,000,000
a °
Solution 1-20 Answer b
‘The 10% note payable is classified as noncurrent,
PAS 1, paragraph 73, provides that fan entity has the discretion to
refinance or rll over an obligation forat least twelve months afer
‘the reporting period underan existing loan facility, the obligation
shal be classified as oncurrent, ven ifitwould otherwise be due
within a shorter period.
‘The 12% note payables classified as current
PAS 1, paragraph 72, provides that an obligation that matures within
‘one year from the end of reporting period is classified as current
even fit isrefinanced ona long-term basis after the reporting period
land before issuance ofthe financial statements,
{nis ease, de 12% note payables financed on March 1,2014
‘and therefore classified sseureent.
1B
Problem 1-21 (AA)
nace, 2013, Ace Company bal P4000 tO ntepasile
den ey, 2014 On Dacor’ 201, cary sed
Aline oferty Banunichalon be cra odorous
3300.00 tone pert shove tee eer te year On
February 1,248 thet boomed 2500000 fay Hank
sn wed P0000 atonal each iat P20 00050 ste
sbi etc ens teed nv 204
meant pasetbouldbe pte crest alien
December 31,2013? 7
3. 40,000,000
b. 10,000,000
e 5,000,000
a 0
Solution 1-21 Anewer a
‘Therefinancing oceued on Febeusry 15,2014, which safer thoend
‘of the reporting period and before issunnce of the 2013 fiasaclal
statements
‘Problem 1-22 (LAA)
Jam Conapany bad P2, 000,000 note payable that is due on February
28, 2018, The entity borrowed P1,600,000 on Febtuary 25, 2014
‘whic basa five year term and used the proceeds to pay don the oate
and used othercash to payte balance, How nich ofthe P2 000,000
note is classified as noneurrent in the Deoember 31, 2013 financial
statements tht wereissuedon March 31,2014?
2,000,000
. 1,600,000
"400,000
4 0
Solution 1-22 Answer a
» Problem 1-23 (AA)
Kumaykay Company provided the following schedule of Kbit on
December 31,2013:
‘Accounts payable 6500000
‘Bank note payable ~ 10% 3,900000,
Bank note payable ~ 11% 5,000,000
Interest payable 130.000
Mortgage note payable ~ 10% 2,000,000,
Bonds payable 4,000,000
+ "The P3,000,000, 1% note was issued March 1,2013, payable
‘on demand. Interests payable every six ont.
‘The one-year P,000,000, 1 note was issue January 15,2013.
On December 31,2013, theentity negotiated writen aeement
‘with the bankto place the nae witha 2-year, P5,000,000, 10%
note obe issued January 15,2014.
The Lor%morgape note was issued October 1, 2010, witha term
of 10 years. Ternsof the note give the bolder theright w demand
immediate payment ifthe enity fils to makea monthly iterest
payment within 10 days from the date the payment is due. On
December 31,2013, the entity isthree moms behind in makingits
required inerestpayment
‘The bonds payable are ten-year, 8% bands, issued Zune 30, 2004,
Interests payable semiannually on Sune 30 and December 3
‘What ancuntshoukd be reported es tot current iabilties on Decerber
31, 20132
a. 15,650,000
B. 11,650,000,
20,650,000
4. 13,650,000
2
Solution 123 Answera
Accounts payable 600,000
‘Bank nore payable ~ 10% 31000000
Inerest payable
Mortgage nate payable 2,000,000
‘Bonds payable ~ due June 30, 2014 4.000.000,
‘Total curteat abilities 15,650,000
the refinancing oceurs on or before theend ofthe reparting period,
therefinae justing event, meaning tbecbigaton classified
asmoncurret Inthicax,the [1%enotepayableis refinanced
‘on December 31,2013 and therefore classifieds moncurrent.
Problem 1-24 AA)
“Manchester Company provided the folowing inermation on December
31,2013:
Employee income taxes withheld 900,000
Cash balance at Firat State Bank 2,500,000
Cash overdra a Harbor Bark 1300000,
‘Accounts receivable with eredit balance "30,000
Estimated expenses of meeting warranties 500,000
Estimated damages 284 result of unsatistactory
performance an 4 contract 4.500000
‘Accounis payable 35,000,000
Defetted serial bonds issued at par and
bearing intorese at 128, payable in semiannual
installments of P500,000 due April and
(October | ofeach year, the last bond to be paid
‘on October 1, 2018, Interest i lao pid
semiannually. 5900,000
‘What amount shouid be reported the December 31,2013 statement
offinancalposiionsstotal cument ilies?
a. 8,100,000
750,000
2. 9,100,000
4. 730,000)
a Solution 1-24 Answer a
Employee income txes withheld
Cash overdral
“Accounts receivable with evedit balance
Estimated warranty aby
“Estimated damages payable
‘Accounts payable
‘Accrued interest og bonds payable from October 119
ecetber 31,2013 (5,000,000. 12% 3/12),
‘Total cure lai
‘The bonds willbe eld overs yearsbecause the semiannual aymentis
500,000. Since she ast baad wilt be paid on October 1, 2019, the
frstbond wll be paidon April, 2015. Accordingly horeis ne curedly|
maturingbondin 2013.
Problem 1-25(AICPA Adapted)
“The unadjusted current assets and shareholders’ equity of United
‘Company on December 31,2013 areas follows
ash 00,000
Financial assets t fir value (including cost of
"P300,000 of United Company's shares) 1,000,000
i 3,500,000
1,500,000
$00,000
2,000,000
Retained earnings 500,000
‘What amount shouldbe reported as total shareholders" equity?
a. 7,200,000
. 7/500,000
& 7/800,000
5,200,000
Solution 1-25 Answer a
‘oral shacchokder equity (7,500,000-300,000) 7.20000
2
Froblem 1-26(AICPA Adapted)
‘Theadjuseia balmce of Kalinga Company on December 31,2013
inched hefolowingacount:
‘Share capital 15,000,000
Shave premium 5,000,000
‘Treasury shares, at cost 2,000,000
‘Actuarial oss recognized through other
compreheosive income
Retained camings unappropriated
Retained earings appropriated
Revaluation surplus,
‘Cumulative transiaion adjustment eredit
‘What amount shouldbe reprtedstotal shareholders’ equity?”
31,500,000
32,500,000
e. 28'300,000
25,300,000
Solution 1-26 Answer a
‘Share capital 15,000,000
‘Share premium 5;000,000
Retained earings unsppropriated 6,00,000
Retained earings appropriated 3,000,000,
Revaluation surplus 4,000,000
Cumulative anslaton adjustment ~ credit 1,300,000
‘Actuarial loss ecognized through otter
‘comprehensive income (1,000,000)
‘Treasury shares, at cost (2.000.009)
‘otal sharbolders equity 31,500,000
‘The credit inthe cumulative translation adjustment aecount isa
‘translation gain, Ifthe account has debit balance itis tansaton ss, Problem 1-27(14A)
Silver Company provided the following information on December 31
2013:
Share premium 1.000.000
‘Accounts payable 1;300,000
Preference share capital, 2 par 000,000
Ordinary share capital, at par 3,000,000
Sales 10'509,000
Total expenses "7,800,000,
‘Treasury shares — ordinary 0,000
Dividends 700,000
Retained earnings — January | 1,000,000,
‘Whattotal sharsholders' equity should bereported on Desernber3),
20137
‘a. 8,000,000
. 8,300,000
©. 5,800,000
& 8,700,000
Solution 1-27 Answera
Sales
‘Total expenses
Net income
Retained earnings ~ Janay 1
Dividends
Retained earings ~ December 31
Preference share capital
(Ondinay share capital
Share premium
Roisned cornings
‘Treasury shares
Total sharcholders‘cquity
Problem 1-28 (AICPAAdapted)
‘Mont Coropany reported net assets traling P, 750,000 on December
31,2013. Theassetsinchadad te Following:
Treasury seeree of Mow: Company 8 cosh 250,000
Idle miners 10,000
‘Trademari 150,000
Allowance for inveriry wetedowa, 200,000
‘Wan amount should be reported as net assets on December 31,
20137
a. 8,500,000
, 820,000
$300,008
4. 200,000
Solution 128 Answer @
Reporied net assets
“Treasury shares
Adjusted net asets
Problem 1-29 (PHILCPA Adapted)
each Company reported:oial assets of P4375 000 at year-end. The
‘eralacsessinclndedihe folowing:
“Treasury shares of Poach Company al cost 120,000
Unemorizedpatort 56000
‘Cash surrender value of life esurance 68,500
(Cumulative wansition oss 42,000
‘Wharamounr should be reported a ot assets al year-end?
4,298,500
b. 4.213.000
©. 4250.50
2 4255,000
» Solution 1-29 Answer b
‘Total ssa per book
Treasury shares
‘Cumuative translation loss
Adjusted tua assets
Problem 1-90 PHILCPA Adapted)
Kabugao Company provided the fllowingon Deceber 31,2013:
‘sh a bank, et of bark overeat oF 500,000 5,00,000
Fey cash repli py cash cxpnssP10,000) 8
Notes recenabie -.o.000,
‘Accouis ccivabl, nt of accounts wih cet laces
‘re s00000, 6 000,000
Inventory 350.060
Bond sinking fond 5.000.000
Total current assets ss
‘Accounts payable, net of accounts wih debitbalonces of.
1000000 7,900,000
Notes payable £000,000,
Bond payable due Jane 30, 2014
‘Accrued expenses
Tota current abilities
1. What amount should be reported total current assets on
December 31,2013?
19,040,000
. 26,040,000
©. 20,050,000
& 24040,000
2. What amount should be reported as total curent liabilities on
December31,20137
19,000,000
'. 16,000,000
©. 15,500,000
4 15;000,000
Solution 1-30
Question I Answerd
(Cash in bank (5,000,000 + 500,000) 5,300,000,
Pest cash (30,000 ~ 10,000) 0,000
Notes receivable 4.900.000
‘Accounts eeevable (6,000,000 + 1,500,000) 7500.00
Inventory 3,000,000
‘Bond sinking fund 3,900,000
Debit balances in accounts payable 1,000,600,
‘Tal curent assets
‘The bond sinking fund is classified as current asserbocause te bond
payables already classified as curently,
‘Theclassiticatoe ofthe fund should parallel the classification of
‘the related lability.
Question 2 Answer a!
Bank overdraft 500.600
Ceo balances in account receivable 1,300,000
‘Accounts payable (7,000,000 1,000,000) 8.00,000
‘Notes payable’ 400,000
Bond payeble 3,000,000
‘Accrued expenses , 00.500
‘Tota eurrent ibltes 19.00.00
n Problem 1-31 (AICPA Adapted)
‘Te following wial balance of Trey Company on December 31,2013
bas been adjusted except for income tax expense:
cash 600,000
‘Accounts receivable, net of allowance of,
100,000 1,650,000,
Prepaid taxes “30,000
‘Accounts payable 140,000
Share capital 500,000
Shae premiom 650,000
Retained eacnings 630,000
Foreigncurency transationadjustment 400,000,
Reveuue 629,000
Expenses 2.600.000
5.850000 5.550000,
During 2013, estimated tax payments of P500.000 were charged to
prepaid taxes. The enty has not yet recorded income tax expense,
"There were no differences between financial and taxable income. The
taxrateis 30%,
Included in accounts receivable is P500,000 due from # customer
Special terms granted to this customer require payment im eval
‘semiannual insullments6fP125,000 overy Api] snd Octobe
1. IntheDecember31, 2013 statement of financial pesition, what
amount shouldbe reported stotal cunt assets?
& 2,000,000
B. 2,200,000
. 7,300,000
4. 2,250,000
2, Inthe December 31,2013 statement of financial position, what
amount shouldbe reported as total eained earings?
a 1,680,000
. 1,200,000
< 1330.000
& 1,630,000
8
Solstion 1-32
Question 1 Answer @
cosh
‘Accounts receivable
Total curent assets
Accounts reecivable 1ssn.000
‘Noncurren portion (125.000 + 125,000) (259,000)
‘Careent portion 40,000
‘The prepaid tanes of P200,000 actually represen: the current tax
expense for 2013 and therefore should be charged to income tax
expense,
Question 2 Answer €
Reverwe
Expenses
{rcowe before income tae
acon 1x (30% x 1,000,000)
‘Net income
Retained eamings Jamary 1
“Total reained earings 1.330.000
“The debit batancein the foreign catency transiavonadjustmentisa
corsponentofotber comprehetsive ncomeand x dedection fsa tial
Sacoholdes' equity because itis atandation loss. ‘Problem 1-32 (AICPA Adapted)
Te folowing tral balance of Mint Company on December 31,2013
thas been adjusted except forincome x expense:
Cash 00,000
Accounts receivable, net 2,500,000,
{Costin excess of billings on
long-term contracts 1,600,000
Billings in excess of cost on
long-term contrects 700,000
Prepaid taxes 450,000
Property, plant, and equipment net 1,510,000,
Note payable ~noneurrent
Sate capital
‘Share premium
Retained earings unappropeated
Retained earnings restricted fer note payable 160,000
Earnings from long-tecm conics 680,000
Coste and expenses 5,180,000
12,840,000 12840000
+ Theentity used the percentage of completion method o count
for long-tem constracton contracts for financial statement and
income tax purposes, All receivables on these contacts are
consideredto pe collectible within [2 months.
+ During2013, estimated tax payrnents of P350,000 were charged
{jo prepaid tes. Theentityhas not recorded income tx expense.
‘There were noteraporaryor permanent differences. The sx rates
30%,
Inthe December 1, 2013 statement offrancil position, whatamout
should be reported as
1, Teualetained earings?
2 1,950,000
b. 2,110,000
© 2,400,000
4. 2,560,000
2. TetalponeurentBiailies?
a. 1,620,000
b. 1,780:000
© 320,000
&. 480,000
3. Toul cunentssew?
5,000,000
4,100,000
5,700,000
225,000
Solution 1-32
Question 1 Answer b
_Eamings from long term contract 680,000
Casts and expenses 15,180,000
Income before income tax 1,500,000
Tncome tax (30% 1,500,000) 550,000)
Netincome 1,030,000,
Retained earnings unappropriated 00,000,
Retained earings restricted 10,000
“Total retained earnings
210,000
Question? Answera
Note payable-noneurrent
‘The"*billings in ecess ofcost on long term contracts account” isa
currentlabitiy.
‘Question 3 Answer
sah 600,000
‘Account resivable 3.500,00,
Costin excess of billings 600,909
‘Total curent assets
‘The prepaid taxes of P450,000 represent the tax expense for 2013,
a Problem 1-33 (PHILCPA Adapted)
‘Maltinational Company provides te following balances on December
31,2083
‘Accounts payable 500,000
‘Aeeroed taxes 300,000
‘Oedinary share capi 5900.00,
Divideods ~ ordinary share {0,000
Dividends — preference share ‘00.000
‘Mortgage payable (P500,000 due in six months) 4,000,000,
Note payable, due January 31, 2015 2,000,000
Shace premium, 500,000
Preference share capital 00,000
Premiumon note payable 200,000
Tacome summicy efdit balance 4000000
Retained earings —Janvary 1 + 2390,000
‘Unamortizediese cost om note payable 50,000
Unearned teat income 150,000
1. Whatis the amount of moncurrent liabilities on December 31
2. Whats the amount ofreained eamings on December31, 20137
2. 6,500,000
». 2,300,000
1,900,000
4. 5,000,000
3, Whats the total shareholders" equityon December 31,2013?
1,000,000
' 13,500,000
© 9,500,000
8,300,000 :
2
Soluion 1-33
Question | Answer d
Mortgage payable 4,000,000 ~ 500,000) 3,500,000
Note payable ve January 31,2015 2000.00
Unamortized ese cost «30,000)
Premiam on nots payeble
Total noncarrent
Unde: PFRS 9, the unamortized issue costs deduction from the
related nancial ability,
Question 2 Answer d
Retained earnings —Jamary 1 2.500000
Netincome 000,000
Dividends ordinary share «.900,000)
Dividends ~ preference share (00.000),
Retained earnings ~ December 31 $00,000
‘The net income is derived from the credit balance ofthe income
summary account, Needlessto say. if this account ha dei balance, it
isanet less
Question 3 Answer b
Preference share capital 3,000,000
Ordinary share capital 5000,000
Share peeriom 500,000
Retained earnings 5,000,000
‘Total shercholders equity 2Bs00900
3 Problem 14 (LAA)
Aroma Comgeny provided the fllwing infomation on Daceber31
2013
cash 300,000
‘Accounts receivable, net o llowanee of PS0,000 00;000
Inventory 1,650,000,
Prepaid expenses 250,000,
‘Property plant and equipment 800,000
‘Accurulated depreciation ‘00,000
‘Accounts payable 1,250,000
‘Acerued expenses x
Bonds payadie 4,002,000,
‘hace capital 5,000,000,
Retained earnings 500,000
‘A. 300,000 note payable to bank, due on June 30, 2014, was
{deducted fiom the balance on deposit inthe same bank. The entity
recorded checks of P200,000 in payment of accounts payable on
December 31,2013. These checks weresilon hand on Janugry 20,
2014. An‘advance payment of P100,000 from acustomer forgeods to
be delivered in 2014 was deduct fom atouns resale: Whats
the working capital on December 31, 20137
1,500,000
'. 3,800,000
©. 1,400,000
000,000
Solution 1-34 Answer a
Curren assets:
‘Cash (300,000 + 500,000 200,000) 190,000
Accounts receivable (80,000 + 100,000) "300,000,
Inventory 1,650,000,
Prepaid expenses 250,000 3,800,800,
‘Current abilities:
‘Accoutpayable(,280.000+200,000) 1,480,000,
Accrued expenses 250,000,
‘Note paysble-benk 00,000
Advances ftom customers 100,009
Workingcapital
Py
Problem -35(1AA)
‘Alena Company provided the following information st yearend:
Property, plant and equipment 35,000,000
‘Accounts receivable 20,000,000,
Prepaid insurance 250,000
‘Shor-tem aot payable
Cash
Bonds payable
‘Toal assets 201, 00,000
Land 20,000,000
Accounts payable 900,000
‘Allowance for doubtut accounts 1,000,000,
Merchandise inventory 15,000,000
Financial aset at Tae value through otber
‘comprehensive income 7,900,000
Wages payable 2,000,000
‘oaallibiiies 36,000,000
Premium on bonds payable 3,000,000
‘What isthe working capital?
46,500,000
», 33,500,000
© 26,300,000
35,500,000,
Solution 1-35 Answere
‘Current assets:
‘Cosh 5,000,000,
‘Accounts receivable 20,000.000,
Allowence for doubiful accounts (1,000,000)
Merchandse inveatory 13,000,000
Prepaid insurance 7500000 39,500,000
Current iabilies:
‘Shor-irm note payable 3,000,000
‘Accounts payable 000,000
‘Wages payable 2900,000 _33,00,000
Working pital Problem 1-36(1AA)
‘Moon Company provided the following data on December 31,2013.
ash in general checking account 00,000
Sinking fund to be weed fo retire bonds in 2016 1,200,000
Cash held to pay valve added taxes 300,000,
[Note receivable due February 2015 2200000,
‘Accounts receivable 200,000
Inventory 00,000
Prepaid insurance 300,000
Vacant ln held a8 investment 500,00
Equipment clasified ae held fr see 200000
‘Accounts payable $400,000
Note payable ~ due July 2014 ‘300,000
Note payable due January 2015 300,000
Bonds payable — maturity 2016 4,600,000,
Salaries payable 00.000
Value added taxes payable 300,000
‘Whatis the amount of working capital on December 31,2013?
3. 4,900,000
». 2,000,000
© 2/260,000
1,700,000
Solution 1-36 Answer b
‘Current assets
(Cash in general checking account $00,000,
(Cash held to poy value added taxes 360,000,
‘Accounts receivable 2,100,000
Inventory 1500000
Prepaid insurance 300,000,
gvipment classified ar held forsale 200,000 4,900,000
Caren Hable:
“Accounis payable 1,400,000
‘Note payabie ~ due July 2014 ‘00.000
Salaries payable 00,000
Value add taxes paysble $300,000
Werkig capital
Problem 1-37 (AICPA Adapted)
‘The following ial balance of Shaw Company on December 31,2013
has been adjusted except for income lax expense:
Cash 675,000
Aecounts receivable (net) 2.535.000,
Inventory 2.185000,
Property, plantand equipment (ne!) 10,245,000
‘Accounts peyeble and accred Hiilites 1.800000
Income payable 1300000
Detect ibility 750.000
Share copita 2,500,000,
Shae premium 300,000
Retained camings, Januacy 1 3,350,000,
Net sales and otacr revenue 15,0000,
‘Coste and expenses
Income tax expense
encanta onset
genta pan co
igh septa enten tase atairat
‘aditpatiane
neem but aera
Ppalonenes
ease
2 Teloreir
& Maes
¢ 050,000
3. Retainedcamings?
vee
Eas
a8
aoge
” Solurion 137
Question | Answer d
cash
‘Accounts receivable
Inventory
Total current assets
Accounts reecivable
Noncurrent partion (125,000. 4)
Adjusted curont portion
hestin 2 Ansvera
Accounts paybleanacean ies 1 g00000
Income koi 30,000 650) Sangon
Tealcure iis roo
‘The estimated tax payment of P600,000 should be adjusted 4s
follows:
Income tax payable 00,000
Tncome tax expease 600,000
Question 3 Anower ©
Net sales and other revenue
Costs and expenses
Income before income tex
Income tex (30% x 5,000,000)
Net income
Retained earnings
January L
Retained earings ~ Deceimber 31
oblem 1-38 (PRILCPA Adapted)
‘Thecurent sections ofthe unadjusted sttement of financial positionof
‘Camarines Company on December 31,2013 were as fellows:
cosh 2,000,000,
[Account receivable 3,000,000
Merchandise inventory 900,000
Prepaid expenses 100,000
Total current atsets 17,960,500
‘Trade sesounts payable nel of a debit balance of P50,000 2,450,000
Interest payable 150,000
come tax payable 300.000
Money claims ofthe union, ponding final decision 500,000,
Mortgage payable, due in fouranaual instalments 2,000,000,
‘Total eurent
‘A review showed tbat the cash balance of P2,000,000 included a
‘xstomer’s check amounting © P100,000 returned bythe bank marked.
NSF, an employee IOU of P50,000, and P200,000 deposited with
the court fora case under litigation. The cash in bank portion of|
1,680,000 isthe balance per bank statement. On December 31,
2013, outsanéing checks amounted to P250,000, The accounts
receivable included the flloring:
Customers’ bi alances 19.00
Seances osu ‘tenn
‘senes supe 203.09
Receiabie Fo ofa ito.
Allowance or dovtalsccouts 0,90)
Selling price of merchandise invoiced at 120%
‘of eost, not yet delivered and excluded fromm
fedinginventory
‘Total accounts receivable
‘What smount should be reported as total current assets on December
31, 20137
» Solurion 1-38 Answer d
Current assets per book 700,000
Deposit with court (200,000)
(Gutstanding checks (230,000)
Advances osubsiciy 490,000),
Selling pie of undelivered merchandise 600,000),
Cost ar undelivered merchandise (600,000, 120%) 500,000
Debit balance in accounts payable 50,000
‘Total curent assets £100,000
"Incidentally ett amount of caren bili is compated as follows:
Accounts payable (2,450,000'+ 50,000), 2,500,000,
Interest payable 130,000
Sncorne fx payable 300,c00
“Mortgage payable ~ current portion (2,000,000 /4)
Total euvent abilities
2
NOTES TO FINANCIALSTATEMENTS
Problem 2-1 (AICPA Adapted)
‘During 013 Jane Company cxgagedin the following wansacions:
Key monagenseat pessoncel compeesasion 2,000,000
‘Solesto afar entities 5,000,000
‘Whariotal amount shoulbe included as related party disclosures in
Jane Compans’s2013 financial semen?
& 5,000,000
3,000,000
© 2,000,000
4 o
Solution 2-1 Answer
PAS 24, paragraph 16, requires disclosure of key management
personnel cocnpensation,
‘The sales toaflinted entities stall be disclosed in Jane Company's
separate financial statements bus efiminated in eonsolidated
Financial satements,
Problem?-2 (FRS)
Gibson Company is part of mor industrial group ands kn mento
avourtey disclose reated party tanstctions sis fnancial statements,
enumeration andthe payrents made otic entity'schiefexceative
officer daring 2013 were:
Anal salary 2.0,009
‘Share optics and other share-based paymeats 1,060,000
Contributions toresicemens benefit plan 300,000,
[Reiaburssinent of tavel expenses for besiness tips 1,200,000
a ‘What total amount shouldbe disclosed as “compensation” to key
management personel?
a. 3,500,000
’. 4,700,000
= 3,900/000
4. 2500000
Solution 2-2 Answer a
All, except reimbursement of travel expenses
Problem?-3(AICPA Adapted)
Dean Company acquired 100% of Morey Company prior to 2013,
During 2013, the individual entities included in their financial
statements the following:
Morey
Key oftices”sataries 500,000
Officers" expenses 400,000
Loans to officers 500,000
Tmtercompany sales
What total amount should be reported as elated party disclosures in
‘thenotesto Dean Company's 2013 consolidated financial statements?
‘a. 1,500,000
», 1.390,000
© 1750,000
4. 3,000,000
Solution 2-3 Answer d
Loans to offices
Dein 1250,000
Macey "500,000
Key officers" salaries:
Dean 150,000
Morey 300,000
‘Tot 3,000,000
Intercompany seles re no longer ditclosed when consolidated
financial stoternentsare prepared.
a
Problem 2-4 (0FRS)
“The aut of Anne Company for the year ended December 31,2013
‘as completed on Marci 1, 2014, The financial statements were
signed by the managing director on March 15, 2014 and
approved by the shareholders on March 31,2014. The next events
have occurred
* On Janvary 15, 2014, a customer owing P900,000 to Anne
‘Company filed for bankrupty. The inncial statements included
allowance for doubtful accounts pertaining othiscustomer
‘only of P100,000.
“+ Anne Company’sissved sae capital comprised 100,000 erdnary
‘hares with P100 par vale, The entity issued addtional 25,000
shares.on March 1, 2014 at par valve
+ Specialized equipment costing P525,000 purchased on
September 1, 2013 was destroyed by fire on December 15,
2013. Anne Company has booked s receivable of P400,000
fom the insurance entiy.
‘After the insurance entity completed itsinvestigaion on Febroary
1, 2014, it was discovered thatthe fie took plave due to
negligence ofthe machine operator. As a result the insurer's
ibility was zero on this lam
‘What total amount should be reported a “adjusting events” on
December31,20137
a 1,300,000
'. 1'200,000
©. 3,800,000
3,700,000
Solution 2-4 Answer®
‘Doubtful secounts (900,000 100,000) 100,000
Loss on claim recetvable 00,000
“otal ajustng events
a Problem 2-5 (IFRS)
‘The end of reporting period of Norway Company is December 31,
2013 and he financial statements are authorized forissue on March
15,2014,
+ OnDecember 31,2013, Norway Company had a receivable
‘of 400,060 from a customer tha is due 60 daysafter the end
of reporting period. On January 15, 2014, a receiver was
appointed forthe said customer. The receiver informed Norway
‘thatthe P400,000 would be paid in fll by June 30, 2014.
* Norway Company measured it investments in listed shares as
‘held foriaingt fir value through profit lass. On Decernber|
31,2013. these investments were recorded atthe market value
‘of P5,000,000. During the period up to Februsry 15, 2014,
there wasa steady decline in the market value ofallhe shares
in the portfolio, and on February 15, 2014, the market value
hha fallen P2,000,000.
Norway Company had reported a contingent liability on
December 31, 2013 related toa court cate in which Norway
‘Company was the defendant, The ease was not heard until the
first week of February 2014, On February 11,2014, te judge
handed down a decision aguinat Norway Company. The jude
‘determined that Norway Company was liable to pay damages
and costs totaling P3,000,000.
* OsDecerber31,2013, Noovay Company hada receivable rosa
flange customer m the amount ofP3.500,000. On January 31,
2014, Norway Company was vised in writingby the lquidstor
ofthe saidcustomer thatthe costemer wasinslvent and that oly
10% of thereceivable willbe paid on Apri 30,2014
‘What total amount should be reported as “adjusting events” on
December 31,2013?
6,150,000
9,150,000
91350,000
6,300,000
“4
Solution 2-3 Answer a
Litigation toss
Bad debt expense (3,500,000 x 90%)
‘Tota amouat of adjusting events
“Thereceivable of P400,000 i nonndjusing event becayse te amount
‘stil collectible although longs term has been given butts long,
as tocause tobe reclassified as noncurrent.
‘Tae fnanciatassets held for trading are measured at fir vahe which
must be determined at the end of each reporting period, The
‘change he far value on February 15,2014 shall be recognize nthe
rnextteporting period, notan Decernber 31,2013.
Problem 2-6 (IFRS)
Ginger Company is completing the preparation ofits draft financial
statements forthe year envied December 31, 2013. The financial
Statements ar authorized forissue on March 31,2034, On March 15,
2014, dividend of P1,750,000 was declared and contractual profit,
‘hare payment of P350,000 was made, both based on the prosicfor the
year ended December 31, 2013. Oa February 1, 2014, customer
‘ent into liquidation having owed the entity P340,000 forthe past 3
‘months, No allowance ted been made against this debt inthe draft
financial ste ments. On March 20,2014, amanufacturingpan was
Sestroyed iy fre resign financial loss ofP2,600,000. What tol
amount should be recognized in profit o loss for the year ended
December 31,2013 to reilectadjusingevents ater theendotieperting
peviod?
a. 1,750,000
b. 3,290,000
e. 2/500,000
690,000
Solution 2.6 Answer d
Contractual profit share payment
Bad debt lose
Total adjusting events
45 Problem 2-7 (IFRS)
Elysee Company's deaf fnanzal statements showed the proftbefore
tax forthe year ended December 31,2013 a P9,000,000, The board
of directors authovizedthe financial statements fr issue con March 20,
2014. A fire occurred at one of Elysee"s sites on January 15,2014
‘with resulting damage costing P7,000,000, only P3,000,000 of
Which is covered by insurance. Te repairs will take place and be
paid for in April 20142, The P4000, 000 claim from the insurance
Entity wil however be received on February 14,2014, What amount
shouldbe reported as profit bofore tx in Elysees finance
a. 13,000,000
3,000,000
© 2,000,000
& 600,000
Solution 2-7 Answer b
‘The profit remains at P9,000,000. Te fire occuring on January 15,
204d isanonadjusting eventon Dosember 31,2013.
Problem2-8 (0FRS)
‘Caress Company carried a provision of P2,000,000 in its drat
financial statements on December 31, 2013 in relation to at
unresolved court case. On January 31, 3014, when the finan
statements on December 3),2013 had not yot heen authorized fo
issue, the case was setfed ind the court decided the final tote
damages payable by Caress tobe P2,800,000. What aroun shoul
bbe adjasted on December 31, 2013 in elation to this event?
a 2,800,000
2,000,000
© "800,000
@ °
Solution 2-8 Answer e
Actua ability 2,800,000
Provision already recoguized 2000,000
Increase in ibility
4
Problem?-9 (IFRS)
During 2013, Marian Company was sued by 2 competitor for
5,000,000 for infeiigement ofa patent. Based on te advice ofthe
‘entity’s legal counsel, the entity acezued the sum of P3,000,000 as
provision init francial statement forthe yeurended Deceraber
31, 2013.
Subsequently, on March 15,2014, the Supreme Court decided in
favor of the party alleging infringement ofthe patent end ordered
the defendant to pay the aggrieved party asum of P3,500,000.
‘The financial statements were prepared by the entity's management
‘on February 15,2014 and approved by the bos of directors on
March 32,2014.
‘What amount shoukberecomnized as accrued lability on Deceeber
31, 20137
a. $000,000
Se 3,500,000
e,” 3,000,000
4 1,300,000
Solution 2-9 Answer b
Accrued liability ~ December 31,2013
‘Theactual amountofP3,500,00 shouldbe acruetas iabiltybocause
the suit was decided on Mirch 15,2014 which sprirto the issuance
‘ofthe Sinaia statements on March 31,2014,
“Noodles to say, since the amount of P3,000,000isalreadyacerued ae
2 provision, en additional provision of PS00,000 shall be adjusted
‘because the actual ibility is P3,500,000
“a Problem 2-10 IFRS)
Caroline Company provided the following events that occurred ater
‘December 34,2013,
{1/1572014 P3,000,000 of accounts receivable was written off ue
‘othebankriptey ofa major customer
2AAROLL A shipping vessel ofthe enty with canying amountof
5,000,000 was completely lost at sea because of @
humane,
SALAOLS _ A cour case hwvolving te entity asthe defendant was
settled ard the entity was obligated to pay the plainifE
500,000. The entity previouslyhas not ecognizeda
liabliy forthe mtbecauserraragenvent dcreditpessib>
‘bat de enity would love the case.
3ASRO14 One of entity's faxories with a caring amount of
4,900,000 vas completely razed by forest fie that
erupedints vicinity.
‘The managernent completed the caf ofthe financial statements for
2013on Fabruary 10,2014, On March 20,2014, te board of directors
‘authorized the Financial statements forsee. The entity announced its
profitand ofherselectedinfomation on March 22,2014. The fincil
Statements were approved by shareholders on April2,2014 and fled
‘wih the SEC te very nextday. What total arapun should be reported
se “adjusting events" on December 31,2013?
=. 9,500,000
», 8,500,000
©. 9,900,000
4 4500,000
Solution 2-10 Answer d
‘Accounts writen off
Provision for lawsuit 5
‘Toualadjusting events
4s
3
STATEMENT OF COMPREHENSIVE INCOME
Problem 3-1 (AICPA Adapted)
Brock Company reported operating expensesinswo caepores, rarely