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Basic Problems
a. 2,800,000
b. 2,550,000
c. 3,600,000
d. 2,100,000
Cash 300,000
Accounts Receivable 1,200,000
Inventory 1,000,000
Prepaid expenses 100,000
Financial assets held for trading 200,000
In the absence of statement to the contrary, equity investment at fair value through other comprehensive income shall
be classified as noncurrent.
PAS 1 and PAS 12 provide that deferred tax asset is a noncurrent asset.
Problem 1-2 (AICPA Adapted)
Cash 1,100,000
Accounts receivable 1,600,000
Inventory 3,000,000
Financial assets at fair value through profit or loss 500,000
Bonds investment at amortized cost 1,300,000
Investment in associate 1,500,000
Equipment and furniture 2,500,000
Accumulated depreciation 1,500,000
Patent 400,000
Deferred charges 100,000
Equipment classified as held for sale 2,000,000
a. 6,300,000
b. 8,300,000
c. 8,200,000
d. 9,800,000
Cash 1,100,000
Accounts receivable 1,600,000
Inventory 3,000,000
Financial assets at fair value through profit or loss 500,000
Equipment classified as held for sale 2,000,000
Under PFRS 5, a noncurrent asset classified as held for sale should be reported as current asset.
Cash 5,000,000
Accounts receivable 2,000,000
Inventory, including goods received on
Consignment P200,000 800,000
Bond investment at fair value through
other comprehensive income 1,000,000
Prepaid expenses, including including a deposit of P50,000
made on inventory to be delivered in 18 months 150,000
What total amount of current assets should be reported on December 31, 2016?
a. 6,750,000
b. 6,700,000
c. 7,700,000
d. 7,750,000
The cash fund to be used to retire bonds payable in 2018 should be classified as noncurrent.
The bond investment at fair value through other comprehensive income is a noncurrent asset.
Problem 1-4 (AICPA Adapted)
Rice Company was incorporated on January 1, 2016 with P5,000,000 from the issuance of share capital and borrowed funds of
P1,500,000. During the first year, net income was P2,500,000.
On December 15, the entity paid a P500,000 cash dividend. On December 31, 2016, the liabilities had increased to P1,800,000.
a. 6,500,000
b. 9,300,000
c. 8,800,000
d. 6,800,000
Liabilities 1,800,000
Share Capital 5,000,000
Retained Earnings (P2,500,000 less dividend P500,000) 2,000,000
Mirr Company was incorporated on January 1, 2016 with proceeds from the issuance of P7,500,000 in share capital and
borrowed funds of P1,100,00. 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, 2016, the entity declared a P300,000 dividend, payable to shareholders on January 15,2017. The liabilities
increased to P2,000,000 by December 31,2016.
a. 11,000,000
b. 11,300,000
c. 10,100,000
d. 12,100,000
Liabilities 2,000,000
Share Capital 7,500,000
Retained Earnings (8,200,000-6,400,000-300,000) 1,500,000
Cash 4,500,000
Accounts Receivable 7,500,000
Notes Receivable, net of discounted note P500,000 2,000,000
Inventory 4,000,000
18,000,000
7,500,000
On December 31, 2016, what amount should be reported as total current assets?
a. 17,000,000
b. 17,500,000
c. 15,000,000
d. 16,500,000
Cash 4,500,000
Accounts Receivable 5,000,000
Allowance for doubtful accounts (500,000)
Notes receivable 2,000,000
Inventory (4,000,000 + 2,000,000) 6,000,000
The selling price of the unsold goods out on consignment is excluded from accounts receivable but the cost of goods should be
included in inventory.
The discounted note receivable is properly netted against the total notes receivable.
Problem 1-7 (AICPA Adapated)
On December 31, 2016, Statute Company reported the following current assets:
Cash 700,000
Accounts Receivable 1,200,000
Inventory 600,000
a. 2,440,000
b. 2,210,000
c. 2,500,000
d. 2,240,000
Cash 700,000
Accounts receivable 930,000
Allowance for doubtful accounts (20,000)
Claim receivable 30,000
Inventory (600,000 + 200,000) 800,000
The selling price of the unsold goods out on consignment is excluded from accounts receivable but the cost of goods should
be included in inventory.
What total amount of current assets should be reported on December 31, 2016?
a. 7,900,000
b. 8,000,000
c. 7,400,000
d. 7,700,000
The equity of the assignee in assigned accounts shall not be offset against the assigned accounts receivable but included in
current liabilities.
The note receivable discounted should be deducted from the total notes receivable with disclosure of contingent liability.
Problem 1-9 (AICPA Adapted)
Cash 3,200,000
Accounts receivable 3,000,000
Inventory 2,800,000
Prepaid insurance 200,000
a. 8,000,000
b. 9,200,000
c. 7,740,000
d. 8,940,000
Cash 3,200,000
Accounts receivable 1,420,000
Allowance for uncollectible accounts (120,000)
Receivable from employees 240,000
Inventory 2,800,000
Prepaid insurance 200,000
The subscription receivable should be reported as a deduction from subscribed share capital because it is not collectible
currently.
Problem 1-10 (AICPA Adapted)
Gar Company reported the following liability account balances on December 31, 2016:
The deferred tax liability is based in temporary differences that will reverse in 2018.
On December 31, 2016, what total amount should be reported as current liabilities?
a. 7,100,000
b. 6,700,000
c. 6,500,000
d. 6,900,000
Under PAS 1 and PAS 12, a deferred tax liability should be classified as noncurrent.
The bonds payable minus the discount on bonds payable should be classified as current because the bonds are due within one
year.
The dividends payable and income tax payable are normally classified as current.
The note payable is classified as noncurrent because it matures in more than one year from the end of reporting period.
Problem 1-11 (AICPA Adapted)
The contingent liability is an accrual for possible loss on a P1,000,000 lawsuit against the entity.
The legal counsel expects the suit to be settled in 2017 and has estimated that the entity will 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 2017.
a. 10,350,000
b. 10,150,000
c. 9,900,000
d. 4,900,000
Under IFRS, the deferred tax liability is classified as noncurrent regardless of the reversal period.
Problem 1-12 (PHILCPA Adapted)
a. 6,700,000
b. 6,600,000
c. 7,100,000
d. 7,700,000
The debit balances in suppliers’ accounts are not “netted” against accounts payable but should be reported as current asset.
The stock dividend payable is not an accounting liability but presented as part of shareholders’ equity as an additional to
share capital.
The claims for increase in wages and allowance should be disclosed as contingent liability.
Problem 1-13 (AICPA Adapted)
Mazda Company reported the following liability balances on December 31, 2016:
The 2016 financial statements were issued on March 31, 2017. Under the loan agreement for the 10% note payable, the entity
has the discretion to refinance the obligation for at least twelve months after December 31, 2016.
On March 1, 2017, the entire P4,000,000 balance of the 12% note payable was refinanced through issuance of a long-term
obligation payable lump sum.
What amount of the notes payable should be classified as current on December 31, 2016?
a. 6,000,000
b. 4,000,000
c. 2,000,000
d. 0
PAS 1, paragraph 73, provides that if an entity has the discretion to refinance or roll over an obligation for at least twelve
months after the reporting period under an existing loan facility, the obligation shall be classified as noncurrent, even if it
would otherwise be due within a shorter period.
PAS 1, paragraph 72, provides that an obligation that matures within one year from the end of the reporting period is
classified as current even if it is refinanced on a long-term basis after the reporting period and before issuance of the
financial statements.
The 12% note payable is refinanced on March 1, 2017 and therefore classifies as current.
Problem 1-14 (AICPA Adapted)
The P1,000,000 bank loan was refinanced with a 5-year loan on January 15,2017. The financial statements were issued March
1, 2017.
What total amount should be reported as current liabilities on December 31, 2016?
a. 2,650,000
b. 5,850,000
c. 5,350,000
d. 4,850,000
The bank loan is classified as current because it is refinanced on January 15, 2017 after the end of the reporting period.
The bonds payable plus the premium on bonds payable should be classified as current because the bonds are due in one year
from the end of reporting period.
On December 31, 2016, Ace Company had P40,000,000 note payable due on February 28, 2017. On December 31, 2016, the
entity arranged a line of credit with City Bank which allows the entity to borrow up to P35,000,000 at one percent above the
prime rate for three years.
On February 15, 2017, the entity borrowed P25,000,000 from City Bank and used P5,000,000 additional cash to liquidate
P30,000,000 note payable. The financial statements were issued on March 31, 2017.
What amount of note payable should be reported as current liability on December 31, 2016?
a. 40,000,000
b. 10,000,000
c. 5,000,000
d. 0
The refinancing occurred on February 15, 2017, which is after the end of the reporting period and before issuance of the 2016
financial. Thus, the note payable is classified totally as current.
Problem 1-16 (IAA)
Jam Company had P2,000,000 note payable that is due on February 28, 2017. The entity borrowed P1,600,000 on February 25,
2017 which has a five year term and used the proceeds to pay down the note and used other cash to pay the balance.
How much of the note payable is classified is classified as current in the December 31, 206 financial statements that were
issued on March 31, 2017?
a. 2,000,000
b. 1,600,000
c. 400,000
d. 0
The note payable is entirely classified as current because it is refinanced on February 25, 2017 which is after the end of
reporting period.
United Company provided the following current assets and shareholders’ equity on December 31, 2016:
Cash 600,000
Financial assets at fair value through profit or loss,
including cost of P300,000 of United Company
shares 1,000,000
Accounts receivable 3,500,000
Inventory 1,500,000
a. 7,200,000
b. 7,500,000
c. 7,800,000
d. 5,200,000
The treasury shares are excluded from financial assets at fair value through profit or loss but should be reported as a
deduction from shareholders’ equity.
Cash 600,000
Financial assets at fair value (1,000,000 – 300,000) 700,000
Accounts receivable 3,500,000
Inventory 1,500,000
a. 31,500,000
b. 32,500,000
c. 28,500,000
d. 25,500,000
The actuarial loss on defined benefit plan is reported as component of other comprehensive income.
The credit in the cumulative translation adjustment account is a translation gain reported as component of other comprehensive
income.
If the cumulative translation adjustment account has debit balance, it is a translation loss.
Problem 1-19 (IAA)
a. 8,000,000
b. 8,500,000
c. 5,800,000
d. 8,700,000
Sales 10,000,000
Total expenses (7,800,000)
Mont Company reported net assets totaling P8,750,000 at year-end which included the following:
a. 8,500,000
b. 8,400,000
c. 8,300,000
d. 8,200,000
Peach Company reported total assets of P8,500,000 at year-end which included the following:
a. 8,000,000
b. 7,750,000
c. 8,500,000
d. 8,250,000
a. 46,500,000
b. 33,500,000
c. 26,500,000
d. 35,500,000
Current assets:
Cash 5,000,000
Accounts receivable 20,000,000
Allowance for doubtful accounts (1,000,000)
Merchandise Inventory 13,000,000
Prepaid insurance 2,500,000 39,500,000
Current liabilities:
Accounts payable 8,000,000
Wages payable 2,000,000
Short-term note payable 3,000,000 13,000,000