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423779157 1 Statement of Financial Position docx - Studocuhttps://www.studocu.com › intermediate-

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Cash 1,100, Accounts receivable 1,600, Inventory 3,000, Financial assets at fair value through profit or
loss 500, Equipment classified as held for sale 2,000,.

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Problem 8-1 (IAA) Simple - Studocuhttps://www.studocu.com › ... › Accountancy

Trade and other receivables. Accounts Receivable 500,000. Allowance for doubtful accounts (50,000).
Notes Receivable 150,000.

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50 How much is the deferred tax asset to be ... - Course Herohttps://www.coursehero.com › file › 50-
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Building – December 31, 20x1:Carrying amount – December 31, 20x19,500,000Tax

base*(9,000,000)Taxable temporary difference500,000Multiply by tax rate30%Deferred ...

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Chapter 1 - Statement of Financial Position: Problem 1-1 (IFRS)https://www.scribd.com › document ›
CFAS-PFA-01

Under the IFRS, deferred tax asset is a noncurrent asset. ... Notes receivable, net of discount note
P500,000 2,000,000 ... Accounts payable 550,000.

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d. debit Unearned Service Revenue and credit Accounts Receivable. ... What is La More's 20X1 net
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(DOC) Financial Accounting 1 Valix | Genavie Solanohttps://www.academia.edu ›

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Revenues and expenses of the canteen should be separated from the ... Machinery 3,000,000 1,200,000
1,800,000 Equipment 400,000 100,000 300,000 Total ...

Missing: Willow CompanyBookvalueTax net500,

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Consolidated statement of profit or loss for the year ended 30 September 2013. $'000. Revenue
(110,000 + (66,000 x 6/12) – (4,000 + 9,000 intra-group sales)).

Missing: Willow CompanyBookvalueTax net500,

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1 (a) Consolidated statement of financial position of Picant as at 31 March 2010. $'000. $'000. Assets.
Non-current assets: Property, plant and equipment ...

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Statement of Financial Position

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Intermediate Accounting 3 (ACC 3111)

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Topic 1- Understanding- Financial- Statements

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Chapter 1

Statement of Financial Position

Basic Problems

Problem 1-1 (IFRS)

Darwin Company provided the following information at year-end: Cash 300, Accounts Receivable 1,200,
Inventory, including inventory expected in the ordinary course of operations to be sold beyond 12
months amounting to P700,000 1,000, Prepaid expenses 100, Financial asset held for trading 200, Equity
investment at fair value through other comprehensive income 800, Deferred tax asset 150,

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

a. 2,800, b. 2,550, c. 3,600, d. 2,100,

Solution 1-1 Answer a

Cash 300, Accounts Receivable 1,200, Inventory 1,000, Prepaid expenses 100, Financial assets held for
trading 200,

Total current assets 2,800,

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)

Violago Company provided the following account balances at year-end:

Cash 1,100, Accounts receivable 1,600, Inventory 3,000, Financial assets at fair value through profit or
loss 500, Bonds investment at amortized cost 1,300, Investment in associate 1,500, Equipment and
furniture 2,500, Accumulated depreciation 1,500, Patent 400, Deferred charges 100, Equipment
classified as held for sale 2,000,

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

a. 6,300, b. 8,300, c. 8,200, d. 9,800,

Solution 1-2 Answer c

Cash 1,100, Accounts receivable 1,600, Inventory 3,000, Financial assets at fair value through profit or
loss 500, Equipment classified as held for sale 2,000,

Total current asset 8,200,

The bond investment at amortized cost is classified as noncurrent.

The investment in associate is a noncurrent asset.

Under PFRS 5, a noncurrent asset classified as held for sale should be reported as current asset.

The deferred charges are considered noncurrent because technically These expire in more than one year
from the end of reporting period.

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.

On December 31, 2016, what amount should be reported as total assets?

a. 6,500, b. 9,300, c. 8,800, d. 6,800,

Solution 1-4 Answer c

Liabilities 1,800, Share Capital 5,000, Retained Earnings (P2,500,000 less dividend P500,000) 2,000,

Total liabilities and shareholders’ equity 8,800,

Problem 1-5 (AICPA Adapted)

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.
On December 31, 2016, what amount should be reported as total assets?

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

Solution 1-5 Answer a

Liabilities 2,000, Share Capital 7,500, Retained Earnings (8,200,000-6,400,000-300,000) 1,500,

Total liabilities and shareholders’ equity 11,000,

Problem 1-6 (AICPA Adapted)

Arabian Company reported the following current assets on December 31,2016:

Cash 4,500, Accounts Receivable 7,500, Notes Receivable, net of discounted note P500,000 2,000,
Inventory 4,000,

18,000,

An analysis disclosed that accounts receivable compromised the following:

Trade accounts receivable 5,000, Allowance for doubtful accounts (500,000) Selling price of Arabian
Company’s unsold goods sent to Tar Company on consignment at 150% of cost and excluded from
Arabian’s ending inventory 3,000,

7,500,

On December 31, 2016, what amount should be reported as total current assets?

a. 17,000, b. 17,500, c. 15,000, d. 16,500,

Solution 1-6 Answer a

Cash 4,500, Accounts Receivable 5,000, Allowance for doubtful accounts (500,000) Notes receivable
2,000, Inventory (4,000,000 + 2,000,000) 6,000,

Total current assets 17,000,

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 cost of goods out on consignment is P3,000,000 divided by 150% or P2,000,

The discounted note receivable is properly netted against the total notes receivable.

Problem 1-8 (PHILCPA Adapted)

Caticlan Company provided the following data on December 31, 2016:

Cash, including sinking fund of P500,000 2,000, Notes receivable 1,200, Notes receivable discounted
700, Accounts receivable – unassigned 3,000, Accounts receivable – assigned 800, Allowance for
doubtful accounts 100, Equity of assignee in accounts receivable assigned 500, Inventory, including
P600,000 cost of goods in transit purchased FOB destination. The goods were received on January 3,
2017 2,800,00 0

What total amount of current assets should be reported on December 31, 2016?

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

Solution 1-8 Answer a

Cash (2,000,000 – 500,000) 1,500, Notes receivable 1,200, Notes receivable discounted (700,000)
Accounts receivable – unassigned 3,000, Accounts receivable – assigned 800, Allowance for doubtful
accounts (100,000) Inventory (2,800,000 – 600,000) 2,200,

Total current assets 7,900,

The sinking fund is a noncurrent asset.

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)

East Company reported the following current assets ar year-end:

Cash 3,200, Accounts receivable 3,000, Inventory 2,800, Prepaid insurance 200,

Total current assets 9,200,

The accounts receivable consisted of the following:

Customers’ accounts 1,420, Employees’ account-current 240, Advances to subsidiary 260, Allowance for
uncollectible accounts (120,000) Subscription receivable, not collectible currently 1,200,

Total accounts receivable 3,000,

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

a. 8,000, b. 9,200, c. 7,740, d. 8,940,

Solution 1-9 Answer c

Cash 3,200, Accounts receivable 1,420, Allowance for uncollectible accounts (120,000) Receivable from
employees 240, Inventory 2,800, Prepaid insurance 200,

Total current assets 7,740,

The advances to subsidiary should be classified as noncurrent.

The subscription receivable should be reported as a deduction from subscribed share capital because it
is not collectible currently.

Problem 1-11 (AICPA Adapted)

Brite Company provided the following information on December 31, 2016:

Accounts payable 550, Unsecured note payable, 8%, due in July 1, 2017 4,000, Accrued expenses 350,
Contingent liability 450, Deferred tax liability 250, Senior binds payable, 7%, due March 31, 2017 5,000,

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.
What total amount should be reported as current liabilities?

a. 10,350, b. 10,150, c. 9,900, d. 4,900,

Solution 1-11 Answer c

Accounts payable 550, Unsecured note payable 4,000, Accrued expenses 350, Senior bonds payable
5,000,

Total current liabilities 9,900,

The contingent liability is only disclosed because it is a possible loss.

Under IFRS, the deferred tax liability is classified as noncurrent regardless of the reversal period.

Problem 1-12 (PHILCPA Adapted)

Burma Company disclosed the following information:

Accounts payable, after deducting debit balances in suppliers’ accounts amounting to P100,000 4,000,
Accrued expenses 1,500, Credit balances of customers’ accounts 500, Stock dividend payable 1,000,
Claims for increase in wages and allowance by employees of the entity, covered in a pending lawsuit
400, Estimated expenses in redeeming prize coupons 600,

What amount should be reported as total current liabilities?

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

Solution 1-12 Answer a

Accounts payable (4,000,000 + 100,000) 4,100, Accrued expenses 1,500, Credit balances in customers’
accounts 500, Estimated liability for coupons 600,

Total current liabilities 6,700,

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 1-14 (AICPA Adapted)

Willem Company reported the following liabilities on December 31, 2016:

Accounts Payable 750, Short-term borrowings 400, Bonds payable due 2017 3,000, Premium on bonds
payable 200, Mortgage payable, current portion P500,000 3,500, Bank loan, due June 30, 2017 1,000,

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, b. 5,850, c. 5,350, d. 4,850,

Solution 1-14 Answer b Accounts payable 750, Short-term borrowings 400, Bonds payable 3,000,
Premium on bonds payable 200, Mortgage payable - current portion 500, Bank loan 1,000,

Total current liabilities 5,850,

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.

Problem 1-15 (IAA)

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, b. 10,000, c. 5,000, d. 0

Solution 1-15 Answer a

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, b. 1,600, c. 400, d. 0

Solution 1-16 Answer a

The note payable is entirely classified as current because it is refinanced on February 25, 2017 which is
after the end of reporting period.

Problem 1-17 (AICPA Adapted)

United Company provided the following current assets and shareholders’ equity on December 31, 2016:
Cash 600, Financial assets at fair value through profit or loss, including cost of P300,000 of United
Company shares 1,000, Accounts receivable 3,500, Inventory 1,500,

Total current assets 6,600,

Share capital 5,000, Share premiuim 2,000, Retained earnings 500, Total shareholders’ equity 7,500,

What amount should be reported as total shareholders’ equity?

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

Solution 1-17 Answer a Share capital 5,000, Share premium 2,000, Retained earnings 500, Treasury
shares, at cost (300,000) Total shareholders’ equity 7,200,

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, Financial assets at fair value (1,000,000 – 300,000) 700, Accounts receivable 3,500, Inventory
1,500,

Total current assets 6,300,

Problem 1-19 (IAA)

Share premium 1,000, Silver Company provided the following information at year-end:

Accounts payable 1,100,

Preference share capital, at par 2,000,

Ordinary share capital, at par 3,000,

Sales 10,000,

Total expenses 7,800,

Treasury shares at cost – ordinary 500,

Dividends 700,

Retained earnings – January 1 1,000,

a. 8,000, What total shareholders’ equity should be reported on December 31?

b. 8,500,

c. 5,800,

d. 8,700,

Sales 10,000, Solution 1-19 Answer a

Net income 2,200, Total expenses (7,800,000)

Retained earnings – January 1 1,000,

Retained earnings – December 31 2,500, Dividends (700,000)

Preference share capital 2,000,

Ordinary share capital 3,000,

Share premium 1,000,

Retained earnings 2,500,

Total shareholders’ equity 8,000, Treasury shares at cost (500,000)

Problem 1-20 (AICPA Adapted)

Mont Company reported net assets totaling P8,750,000 at year-end which included the following:

Treasury shares of Mont Company at cost 250, Idle machinery 100, Trademark 150, Allowance for
inventory writedown 200,

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

a. 8,500, b. 8,400, c. 8,300, d. 8,200,

Solution 1-20 Answer a

Reported net assets 8,750, Treasury shares (250,000)

Adjusted net assets 8,500,

Problem 1-21 (PHILCPA Adapted)

Peach Company reported total assets of P8,500,000 at year-end which included the following:

Treasury shares of Peach Company at cost 500, Unamortized patent 300, Cash surrender value of life
insurance 150, Cumulative transaction loss 250,

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

a. 8,000, b. 7,750, c. 8,500, d. 8,250,

Solution 1-21 Answer b

Adjusted total assets (8,500,000 – 500,00 – 250,000) 7,750,

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Problem 1-2 (AICPA Adapted) Violago Company provided the following account balances at year-end:
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 What total amount should be reported as current assets at
year-end? a. 6,300,000 b. 8,300,000 c. 8,200,000 d. 9,800,000 Solution 1-2 Answer c 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 Total
current asset 8,200,000 The bond investment at amortized cost is classified as noncurrent. The
investment in associate is a noncurrent asset. Under PFRS 5, a noncurrent asset classified as held for
sale should be reported as current asset. The deferred charges are considered noncurrent because
technically These expire in more than one year from the end of reporting period.

Problem 1-3 (AICPA Adapted) Petite Company reported the following current assets on December 31 ,
2016: 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 Total current assets 8,950,000 Cash in general
checking account 3,500,000 Cash fund to be used to retire bonds payable in 2018 1,000,000 Cash
held to pay value added taxes 500,000 Total cash 5,000,000 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 Solution 1-3 Answer b Cash (3,500,000 + 500,000) 4,000,000 Accounts Receivable
2,000,000 Inventory (800,000 – 200,000) 600,000 Prepaid expenses (150,000-50,000) 100,000
Total current assets 6,700,000 The goods received on consignment should be excluded from
inventory. 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. On December 31, 2016, what amount should be reported as
total assets? a. 6,500,000 b. 9,300,000 c. 8,800,000 d. 6,800,000 Solution 1-4 Answer c Liabilities
1,800,000 Share Capital 5,000,000 Retained Earnings (P2,500,000 less dividend P500,000)
2,000,000 Total liabilities and shareholders’ equity 8,800,000 Problem 1-5 (AICPA Adapted) 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. On December 31, 2016, 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 1-5 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

Problem 1-6 (AICPA Adapted) Arabian Company reported the following current assets on December
31,2016: 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 An analysis
disclosed that accounts receivable compromised the following: Trade accounts receivable
5,000,000 Allowance for doubtful accounts (500,000) Selling price of Arabian Company’s unsold
goods sent to Tar Company on consignment at 150% of cost and excluded from Arabian’s ending
inventory 3,000,000 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 Solution 1-6 Answer a
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 Total
current assets 17,000,000 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 cost of goods out
on consignment is P3,000,000 divided by 150% or P2,000,000 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
An examination of the accounts receivable revealed the following: Trade accounts 930,000
Allowance for doubtful accounts (20,000) Claim against shipper for goods lost in transit 30,000
Selling prices 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 is the correct amount of
current assets on December 31, 2016? a. 2,440,000 b. 2,210,000 c. 2,500,000 d. 2,240,000 Solution 1-7
Answer a Cash 700,000 Accounts receivable 930,000 Allowance for doubtful accounts
(20,000) Claim receivable 30,000 Inventory (600,000 + 200,000) 800,000 Total current assets
2,440,000 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 cos of goods out on consignment
is P260,000 divided by 130% or P200,000.

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Intermediate Accounting 3

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Problem 1-8 (PHILCPA Adapted) Caticlan Company provided the following data on December 31, 2016:
Cash, including sinking fund of P500,000 2,000,000 Notes receivable 1,200,000 Notes
receivable discounted 700,000 Accounts receivable – unassigned 3,000,000 Accounts
receivable – assigned 800,000 Allowance for doubtful accounts 100,000 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, 2017 2,800,000 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 Solution 1-8 Answer a Cash (2,000,000 – 500,000) 1,500,000 Notes
receivable 1,200,000 Notes receivable discounted (700,000) Accounts receivable –
unassigned 3,000,000 Accounts receivable – assigned 800,000 Allowance for doubtful
accounts (100,000) Inventory (2,800,000 – 600,000) 2,200,000 Total current assets
7,900,000 The sinking fund is a noncurrent asset. 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) East Company reported the following current assets ar year-end: Cash
3,200,000 Accounts receivable 3,000,000 Inventory 2,800,000 Prepaid insurance
200,000 Total current assets 9,200,000 The accounts receivable consisted of the following:
Customers’ accounts 1,420,000 Employees’ account-current 240,000 Advances to subsidiary
260,000 Allowance for uncollectible accounts (120,000) Subscription receivable, not collectible
currently 1,200,000 Total accounts receivable 3,000,000 What total amount should be
reported as current assets at year-end? a. 8,000,000 b. 9,200,000 c. 7,740,000 d. 8,940,000 Solution 1-9
Answer c 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 Total current assets 7,740,000 The advances to subsidiary should be
classified as noncurrent. 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: Accounts payable 1,900,000 Bonds payable, due December 31, 2017
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 600,000 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 Solution 1-10 Answer c Accounts payable 1,900,000 Dividends payable 500,000
Income tax payable 900,000 Bonds payable 3,400,000 Discount on bonds payable
(200,000) Total current liabilities 6,500,000 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) Brite Company provided the following information on December 31,
2016: Accounts payable 550,000 Unsecured note payable, 8%, due in July 1, 2017 4,000,000
Accrued expenses 350,000 Contingent liability 450,000 Deferred tax liability 250,000
Senior binds payable, 7%, due March 31, 2017 5,000,000 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. What total amount should be reported as current liabilities? a. 10,350,000 b.
10,150,000 c. 9,900,000 d. 4,900,000 Solution 1-11 Answer c Accounts payable 550,000
Unsecured note payable 4,000,000 Accrued expenses 350,000 Senior bonds payable
5,000,000 Total current liabilities 9,900,000 The contingent liability is only disclosed because it is
a possible loss. Under IFRS, the deferred tax liability is classified as noncurrent regardless of the reversal
period.

Problem 1-12 (PHILCPA 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 Stock dividend
payable 1,000,000 Claims for increase in wages and allowance by employees of the entity,
covered in a pending lawsuit 400,000 Estimated expenses 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 1-12 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 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: 10% note payable issue on October 1, 2015, maturing October 1, 2017 2,000,000 12%
note payable issued on March 1, 2015, maturing on March 1, 2017 4,000,000 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 Solution 1-13
Answer b The 10% note payable is classified as noncurrent. 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. The 12% note payable is classified as current. 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) Willem Company reported the following liabilities on December 31,
2016: Accounts Payable 750,000 Short-term borrowings 400,000 Bonds payable due 2017
3,000,000 Premium on bonds payable 200,000 Mortgage payable, current portion P500,000
3,500,000 Bank loan, due June 30, 2017 1,000,000 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 Solution 1-14 Answer b Accounts payable 750,000 Short-term
borrowings 400,000 Bonds payable 3,000,000 Premium on bonds payable 200,000
Mortgage payable - current portion 500,000 Bank loan 1,000,000 Total current liabilities
5,850,000 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. Problem
1-15 (IAA) 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 Solution 1-15 Answer a 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 Solution 1-16 Answer a The note payable is entirely
classified as current because it is refinanced on February 25, 2017 which is after the end of
reporting period. Problem 1-17 (AICPA Adapted) 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 Total current assets
6,600,000 Share capital 5,000,000 Share premiuim 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 1-17 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 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 Total current assets 6,300,000
 Problem 1-18 Kalinga Company provided the following information at year-end: Share capital
15,000,000 Share premium 5,000,000 Treasury shares, at cost 2,000,000 Actuarial loss
on defined benefit plan 1,000,000 Retained earnings unappropriated 6,000,000 Retained
earnings appropriated 3,000,000 Revaluation surplus 4,000,000 Cumulative translation
adjustment – credit 1,500,000 What amount should be reported as total shareholders’ equity? a.
31,500,000 b. 32,500,000 c. 28,500,000 d. 25,500,000 Solution 1-18 Answer a Share capital
15,000,000 Share premium 5,000,000 Retained earnings unappropriated 6,000,000
Retained earnings appropriated 3,000,000 Revaluation surplus 4,000,000 Cumulative
translations adjustment – credit 1,500,000 Actuarial loss on defined benefit plan (1,000,000)
Treasury shares, at cost (2,000,000) Total shareholders’ equity 31,500,000 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) 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 shares at cost – ordinary 500,000 Dividends 700,000 Retained
earnings – January 1 1,000,000 What total shareholders’ equity should be reported on
December 31? a. 8,000,000 b. 8,500,000 c. 5,800,000 d. 8,700,000 Solution 1-19 Answer a Sales
10,000,000 Total expenses (7,800,000) Net income 2,200,000 Retained earnings –
January 1 1,000,000 Dividends (700,000) Retained earnings – December 31
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 1-20 (AICPA Adapted) Mont Company reported 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 writedown 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 1-20 Answer a Reported net assets 8,750,000 Treasury shares (250,000)
Adjusted net assets 8,500,000 Problem 1-21 (PHILCPA Adapted) Peach Company reported total
assets of P8,500,000 at year-end which included the following: Treasury shares of Peach Company at
cost 500,000 Unamortized patent 300,000 Cash surrender value of life insurance
150,000 Cumulative transaction loss 250,000 What amount should be reported as total assets at
year-end? a. 8,000,000 b. 7,750,000 c. 8,500,000 d. 8,250,000 Solution 1-21 Answer b Adjusted total
assets (8,500,000 – 500,00 – 250,000) 7,750,000

Problem 1-22 (IAA) Alena Company provided the following information at year-end: Property, plant,
and equipment 35,000,000 Land 20,000,000 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 Financial asset at fair value through other
comprehensive income 7,000,000 Accounts payable 8,000,000 Wages payable
2,000,000 Short-term note payable 3,000,000 Bonds payable 40,000,000 Premium on
bonds payable 3,000,000 What is the working capital? a. 46,500,000 b. 33,500,000 c. 26,500,000
d. 35,500,000 Solution 1-22 Answer c 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 Working Capital
26,500,000

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