CHAPTER 1: STATEMENT OF FINANCIAL POSITION (BASIC PROBLEMS)

PROBLEM 1 – 1 (AICPA Adapted)

Pollux Company provided the following information at year-end:

Cash
3,500,000

Cash fund for value added tax

500,000

Accounts receivable
2,000,000

Inventory, including inventory expected in the ordinary

course of operations to be sold beyond 12 months

amount to P700,000
1,000,000

Prepaid expenses, including P50,000 deposit made on

inventory to be delivered in 18 months

250,000

Financial asset held for trading

300,000

Equity investment at FVOCI

800,000

Investment in associate
2,500,000

Equipment held for sale

2,000,000

Deferred tax assets

150,000
What amount should be reported as total current assets at year-end?

a. 9,000,000
b. 9,500,000
c. 9,550,000
d. 7,500,000

Solution 1 -1, Answer b

Cash
3,500,000

Cash fund for value added tax

500,000

Accounts receivable
2,000,000

Inventory
1,000,000

Prepaid expenses (250,000 – 50,000)

200,000

Financial asset held for trading

300,000

Equipment held for sale

2,000,000

Total current assets

9,500,000

PROBLEM 1 – 2 (AICPA Adapted)

Statute Company reported the following current assets at year-end:

Cash
700,000

Accounts receivable
1,200,000

Inventory
600,000

An examination of the accounts receivable revealed the following:

Trade accounts receivable

930,000

Allowance for doubtful accounts

( 20,000)

Claim against shipper for goods lost in transit

30,000

Selling price of unsold goods sent out on consignment

at 130% of cost and not included in ending inventory 260,000

Total accounts receivable

1,200,000

What total amount should be reported as current assets at year-end?

a. 2,440,000
b. 2,210,000
c. 2,500,000
d. 2,240,000

Solution 1 – 2, Answer a
Cash
700,000

Accounts receivable
930,000

Allowance for doubtful accounts

( 20,000)

Claim receivable
30,000

Inventory
800,000

Total current assets

2,440,000

Inventory per book

600,000

Cost of goods out on consignment

200,000

Adjusted Inventory
800,000

PROBLEM 1 -3 (AICPA Adapted)

West Company reported the following current assets at year-end:

Cash
3,500,000

Accounts receivable
3,000,000
Notes receivable, net of P200,000 discounted note
1,000,000

Inventory
1,500,000

Prepaid Insurance
400,000

Total accounts receivable

3,000,000

What total amount should be reported as current assets at year-end?

a. 7,900,000
b. 8,100,000
c. 7,700,000
d. 8,400,000

Solution 1 – 3, Answer a

Cash
3,500,000

Accounts receivable
1,400,000

Allowance for doubtful accounts

( 100,000)

Notes receivable
1,000,000

Receivable from employees

200,000

Inventory
1,500,000
Prepaid insurance
400,000

Total current assets

7,900,000

PROBLEM 1 – 4 (AICPA Adapted)

Ivan Company showed the following current assets at year-end:

Cash
3,200,000

Accounts receivable
2,500,000

Inventory
2,000,000

Total current assets

7,700,000

Cash on hand, including customer postdated check

P100,000 and employee IOU P50,000

500,000

Cash in bank per bank statement (outstanding

check at year-end P200,000)

2,700,000

Total cash
3,200,000

What total amount should be reported as current assets?

a. 7,700,000
b. 7,450,000
 c. 7,400,000
d. 7,500,000

Solution 1 – 4, Answer d

Cash on hand (500,000 – 100,000 – 50,000)

350,000

Cash in bank
2,500,000

Accounts receivable
2,600,000

Advances to employee
50,000

Inventory
2,000,000

Total current assets

7,500,000

Cash in bank per bank statement

2,700,000

Outstanding check
( 200,000)

Adjusted cash in bank

2,500,000

Accounts receivable
2,500,000

Customer postdated check

100,000
Adjusted balance
2,600,000

PROBLEM 1-5 (AICPA Adapted)

Gar Company reported the following liability account balances on December 31,
2023:

Accounts Payable
1,900,000

Bonds payable, due December 21, 2025

3,400,000

Discount on bonds payable

200,000

Deferred tax liability

400,000

Dividends payable
500,000

Income tax payable

900,000

Note payable, due December 31, 2024

600,000

On December 31, 2023, what total amount should be reported as current liabilities?

a. 7,100,000
b. 4,300,000
c. 3,900,000
d. 3,300,000

Solution 1 – 5, Answer c
Accounts payable
1,900,000

Dividends payable
500,000

Income tax payable

900,000

Note payable due December 31, 2024

600,000

Total current liabilities

3,900,000

PROBLEM 1 – 6 (AICPA Adapted)

Brite Company provided the following information on December 31, 2023:

Accounts Payable
550,000

Note payable, 8% unsecured, due July 1, 2025

4,000,000

Accrued expenses
350,000

Contingent liability
450,000

Deferred tax liability

250,000

Bonds payable, 7% due December 31, 2024

5,000,000

Premium on bonds payable

500,000
The contingent liability is an accrual for possible loss on a P1,000,000 lawsuit filed
against the entity.

The legal counsel expected the suit to be settled in 2024 and estimated that the
entity shall be liable for damages in the range of P450,000 to P750,000.

The deferred tax liability is not related to an asset for financial reporting and is
expected to reverse in 2024.

What total amount should be reported as current liabilities on December 31, 2023?

a. 4,900,000
b. 5,350,000
c. 6,400,000
d. 6,850,000

Solution 1 – 6, Answer c

Accounts Payable
550,000

Accrued expenses
350,000

Bonds payable due December 31, 2024

5,000,000

Premium on bonds payable

500,000

Total current liabilities

6,400,000

PROBLEM 1 – 7 (PHILPA Adapted)

Burma Company disclosed the following information:

Accounts payable, after deducting debit balances in

suppliers’ accounts amounting to P100,000

4,000,000

Accrued expenses
1,500,000

Credit balances of customers’ accounts

500,000

Share dividend payable

1,000,000

Claims for increases in wages and allowance by employees

of the entity, covered in a pending lawsuit

400,000

Estimated expense in redeeming prize coupons

600,000

What amount should be reported as total current liabilities?

a. 6,700,000
b. 6,600,000
c. 7,100,000
d. 7,700,000

Solution 1 – 7, Answer a

Accounts payable (4,000,000 + 100,000)

4,100,000

Accrued expenses
1,500,000

Credit balances in customers’ accounts

500,000
Estimated liability for coupons
600,000

Total current liabilities

6,700,000

Accounts payable
4,000,000

Debit balances in suppliers’ accounts

100,000

Adjusted accounts payable

4,100,000

PROBLEM 1 – 8 (AICPA Adapted)

Kenya Company provided the following information on December 31, 2023:

Cash in bank, net of bank overdraft P500,000

5,000,000

Petty cash, unreplenished petty cash expenses P10,000

50,000

Notes receivable
4,000,000

Accrued receivable, net of customers’ accounts with

credit balances P1,500,000

6,000,000

Inventory
3,000,000

Bond sinking fund

3,000,000
Accounts payable, net of suppliers’ accounts with debit

balances P1,000,000
7,000,000

Notes payable
4,000,000

Bonds payable due June 30, 2024

3,000,000

Accrued expenses
2,000,000

What amount should be reported as total current assets on December 31, 2023?

a. 19,400,000
b. 20,040,000
c. 20,050,000
d. 24,040,000

Solution 1 – 8, Answer d

Cash in bank (5,000,000 + 500,000)

5,500,000

Petty cash (50,000 – 10,000)

40,000

Notes receivable
4,000,000

Accounts receivable (6,000,000 – 1,500,000)

7,500,000

Inventory
3,000,000
Bond sinking fund
3,000,000

Debit balances in accounts payable

1,000,000

Total current assets

24,040,000

PROBLEM 1 – 9 (AICPA Adapted)

Willem Company reported the following liabilities on December 31, 2023:

Accounts payable
2,000,000

Short-term borrowings
1,500,000

Bonds payable due December 31, 2025

3,000,000

Discount on bonds payable

500,000

Mortgage payable, current portion P500,000

3,500,000

Bank loan, due June 30, 2024

1,000,000

Note payable due October 31, 2024

2,000,000

The P1,000,000 bank loan was refinanced with a 5-year loan on December 31,
2023. The financial statements were issued March 1, 2024.

Under the loan agreement, the entity has the right on December 31, 2023 to roll over
the note payable for at least twelve months after December 31, 2023.

What total amount should be reported as current liabilities on December 31, 2023?
 a. 7,500,000
b. 5,000,000
c. 8,500,000
d. 4,000,000

Solution 1 – 9, Answer d

Accounts payable
2,000,000

Short-term borrowings
1,500,000

Mortgage payable – current position

500,000

Total current liabilities

4,000,000

PROBLEM 1 -10 (IAA)

Manchester Company provided the following information on December 31, 2023:

Employee income tax withheld

900,000

Cash balance at First State Bank

2,500,000

Cash overdraft at Harbor Bank

1,300,000

Accounts receivable with credit balance

750,000

Estimated amount of meeting warranties

500,000

Estimated damages as a result of unsatisfactory

 performance on contract
1,500,000

Accounts payable
3,000,000

Deferred series bonds, issued at par and bearing

interest at 12%, payable in semiannual installments

of P500,000 due April 1 and October 1 of each year,

the last bond to be paid on October 1, 2029. Interest

is also paid semiannually.

5,000,000

What amount should be reported as total current liabilities on December 31, 2023?

a. 8,100,000
b. 7,950,000
c. 9,100,000
d. 7,350,000

Solution 1 – 10, Answer a

Employee income taxes withheld

900,000

Cash overdraft
1,300,000

Accounts receivable with credit balances

750,000

Estimated warranty liability

500,000
Estimated damages payable
1,500,000

Accrued interest on bond payable from October 1 to

December 31, 2023 (5,000,000 x 12% x 3/12)

150,000

Total current liabilities

8,100,000

PROBLEM 1 – 11 (AICPA Adapted)

Charice Company provided the following information on December 31, 2023:

 Accounts payable amounted to P500,000 and accrued expenses totaled

P300,000 on December 31, 2023.
 On December 15, 2023, the entity declared a cash dividend of P7 per share
on 100,000 outstanding shares, payable on January 15, 2024.
 On July 1, 2023, the entity issued P5,000,000. 8% bonds for P4,400,000 to
yield 10%. The bonds mature on June 30, 2028 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 of taxable temporary difference to reverse in 2024.
The income tax rate is 25%. The entity made estimated income tax payments
during the year of P1,000,000.

What amount should he reported as total current liabilities on December 31, 2023?
a. 3,200,000
b. 2,700,000
c. 2,300,000
d. 2,200,000

Solution 1 – 11, Answer d

Accounts payable
500,000

Accrued expenses
300,000

Dividends payable (100,000 x 7)

700,000

Accrued interest payable (5,000,000 x 8% x 6/12)

200,000

Income tax payable

500,000

Total current liabilities

2,200,000

Current tax expense 6,000,000 x 25%)

1,500,000

Estimated tax payment

(1,000,000)

Income tax payable

500,000

PROBLEM 1 – 12 (AICPA Adapted)

United Company provided the following current assets and shareholders’ equity at
year-end:

Cash
600,000

Financial assets at FVPL, including a cost of P300,000

 Of United Company shares
1,000,000

Accounts receivable
3,500,000

Inventory
1,500,000

Total current assets

6,600,000

Share capital
5,000,000

Share premium
2,000,000

Retained earnings
500,000

Total shareholders’ equity

7,500,000

What amount should be reported as total shareholders’ equity?

a. 7,200,000
b. 7,500,000
c. 7,800,000
d. 5,200,000

Solution 1 – 12, Answer a

Share capital
5,000,000
Share premium
2,000,000

Retained earnings
500,000

Treasury shares, at cost

(300,000)

Total shareholders’ equity

7,200,000

PROBLEM 1 – 13 (IAA)

Silver Company provided the following information at year-end:

Share premium
1,000,000

Accounts payable
1,100,000

Preference share capital, at par

2,000,000

Ordinary share capital, at par

3,000,000

Sales
10,000,000

Total expenses
7,800,000

Treasury share at cost – ordinary

500,000

Dividends declared
700,000
Retained earnings – beginning
1,000,000

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

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

Solution 1 – 13, Answer a

Sales
10,000,000

Total expenses
( 7,800,000)

Net income
2,200,000

Retained earnings – beginning

1,000,000

Dividends declared
( 700,000)

Retained earnings – ending

2,500,000

Preference share capital

2,000,000

Ordinary share capital

3,000,000
Share premium
1,000,000

Retained earnings
2,500,000

Treasury shares, at cost

( 500,000)

Total shareholders’ equity

8,000,000

PROBLEM 1 – 14 ( AICPA Adapted)

Mont Company net assets totaling P8,750,000 at year-end which included the
following:
Treasury shares of Mont Company, at cost
250,000

Idle machinery
100,000

Trademark
150,000

Allowance for inventory write-down

200,000

What amount should be reported as net assets at year-end?

a. 8,500,000
b. 8,400,000
c. 8,300,000
d. 8,200,000
Solution 1 – 14, Answer a

Reported net assets

8,750,000

Treasury shares, at cost

( 250,000)

Adjusted net assets

8,500,000

PROBLEM 1 – 15 (PHILCPA Adapted)

Mirr Company was incorporated on January 1, 2023 with proceeds from the
issuance of P7,500,00 in share capital and borrowed funds of P1,000,000. During
the first year, revenue from sales and consulting amounted to P8,200,000, and
operating costs and expenses totaled P6,400,000.

On December 15, 2023, the entity declared a P300,000 dividend, payable

shareholders on January 15, 2024. The liabilities increased to P2,000,000 by
December 31, 2023.

On December 31, 2023, what amount should be reported as total assets?

a. 11,000,000
b. 11,300,000
c. 10,100,000
d. 12,100,000

Solution 1 – 15, Answer a

Liabilities
2,000,000

Share capital
7,500,000
Retained earnings (8,200,000 – 6,400,000 – 300,000)
1,500,000

Total liabilities and shareholders’ equity

11,000,000