Chapter 37-Presentation of Fs
Chapter 37-Presentation of Fs
Chapter 37-Presentation of Fs
Chapter 37: Multiple choice – Computational (SET B) – (For classroom instruction purposes)
Current assets
1. The ledger of RELISH TASTE Co. as of December 31, 20x1 includes the following:
Assets
Cash 20,000
Trade accounts receivable (net of ₱20,000 credit balance in accounts) 80,000
Held for trading securities 160,000
Financial assets designated at FVPL 60,000
Investment in equity securities at FVOCI 140,000
Investment in bonds measured at amortized cost (due in 3 years) 120,000
Prepaid assets 20,000
Deferred tax asset (expected to reverse in 20x2) 24,000
Investment in Associate 72,000
Investment property 92,000
Sinking fund 76,000
Property, plant, and equipment 200,000
Goodwill 56,000
Totals 1,120,000
Current liabilities
2. The ledger of CONGRUENT HARMONIOUS Co. as of December 31, 20x1 includes the following:
Liabilities
Bank overdraft 20,000
Trade accounts payable (net of ₱20,000 debit balance in accounts) 80,000
Notes payable (due in 20 semi-annual payments of ₱8,000) 160,000
Interest payable 60,000
Bonds payable (due on March 31, 20x2) 140,000
Discount on bonds payable (60,000)
Dividends payable 20,000
Share dividends payable 24,000
Deferred tax liability (expected to reverse in 20x2) 72,000
Income tax payable 88,000
Contingent liability 200,000
Reserve for contingencies 56,000
Totals 860,000
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Additional information:
COURIER Co.’s financial statements were authorized for issue on April 15, 20x2.
The 10% note payable is due on July 1, 20x2 and pays semi-annual interest every July 1 and December
31. On January 28, 20x2, COURIER Co. entered into a refinancing agreement with a bank to refinance the
entire note by issuing a long-term obligation.
The 12% note payable is due on March 31, 20x2 and pays annual interest every March 31. On January 31,
20x2, COURIER Co. extended the maturity of the note to March 31, 20x3 under the existing loan
agreement. The extension of maturity date is at the option of COURIER.
The 14% mortgage note is due on December 31, 20x9. Per agreement with the creditor, COURIER is to
pay quarterly interests on the note, failure to do so will render the note payable on demand. COURIER
failed to pay the 3rd and 4th quarterly interests on the note during 20x1.
Working capital
5. Below are the account balances prepared by the bookkeeper for REEDY SLENDER Company as of
December 31, 20x1:
Assets Liabilities
Cash 60,000 Accounts payable 80,000
Accounts receivable, net 176,000 Notes payable 400,000
Inventory 160,000
Prepaid income tax 32,000
Prepaid assets 20,000
Investment in subsidiary 40,000
Land held for sale 112,000
Property, plant, and
200,000
equipment
Totals 800,000 480,000
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Additional information:
Cash consists of the following:
Petty cash fund (unreplenished petty cash expenses, ₱6,000) 8,000
Cash in bank (40,000)
Payroll fund 56,000
Tax fund 28,000
Cash to be contributed to a sinking fund set up for the
retirement of bonds maturing on December 31, 20x3 8,000
Total Cash 60,000
Checks amounting to ₱122,000 were written to suppliers and recorded on December 30, 20x1, resulting
to a bank overdraft of ₱40,000. The checks were mailed on January 5, 20x2.
The inventory includes cost of goods amounting to ₱40,000 that are expected to be sold beyond 12
months but within the ordinary course of business. Also, the inventory includes cost of consigned goods
received on consignment from WEAK Co. amounting to ₱20,000.
Prepaid income tax represents excess of payments for quarterly corporate income taxes during 20x1
over the actual annual corporate income tax as of December 31, 20x1.
Prepaid assets includes a ₱8,000 security deposit on an operating lease which is expected to expire on
March 31, 20x3. The security deposit will be received on lease expiration.
The land qualified for classification as “asset held for sale” under PFRS 5 Non-current Assets Held for Sale
and Discontinued Operations as of December 31, 20x1.
Accounts payable is net of ₱24,000 debit balance in suppliers’ accounts. Accounts payable includes the
cost of goods held on consignment from WEAK Co. which were included in inventory.
The notes payable are dated July 1, 20x1 and are due on July 1, 20x4. The notes payable bears an annual
interest rate of 10%. Interest is payable annually.
Working capital
6. The ledger of NEOPHYTE BEGINNER Co. as of December 31, 20x1 includes the following:
Assets
Petty cash fund 28,000
Cash in bank – Banco De Oro 60,000
Cash in bank – Metrobank 20,000
Accounts receivable (including ₱60,000 pledged accounts) 140,000
Accounts receivable – assigned 100,000
Equity in assigned receivables 40,000
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Notes receivable (including ₱80,000 notes receivable discounted) 180,000
Notes receivable discounted 80,000
Advances to subsidiary 128,000
Held for trading securities 80,000
Inventory 248,000
Deferred charges 72,000
Cash surrender value 24,000
Bond sinking fund 400,000
Total assets 1,600,000
Liabilities
Accounts payable 160,000
Estimated warranty liability 56,000
Loans payable related to assigned receivables (due in 12 months) 60,000
Accrued expenses 52,000
Bonds payable (due on December 31, 20x2) 400,000
Premium on bonds payable 32,000
Total liabilities 760,000
Additional information:
Petty cash fund includes IOU’s from employees amounting to ₱8,000. The remaining balance of ₱20,000
represents bills and coins.
Cash in bank – Banco de Oro represents the balance per bank statement. As of December 31, 20x1,
deposits in transit amounted to ₱40,000 while outstanding checks amounted to ₱12,000. Included in the
bank statement as of December 31, 20x1 is an NSF check amounting to ₱32,000.
Cash in bank – Metrobank represents the balance per ledger. As of December 31, 20x1, deposits in
transit amounted to ₱8,000 while outstanding checks amounted to ₱4,000.
Accounts receivable (unassigned) includes uncollectible past due accounts of ₱16,000 which need to be
written-off.
Also included in accounts receivable (unassigned) is a ₱20,000 receivable from a customer which was
given a special credit term. Under the special credit term, the customer shall pay the ₱20,000 receivable
in equal quarterly installments of ₱2,500. The last payment is due on December 31, 20x3.
The held for trading securities include the reacquisition cost of NEOPHYTE Co.’s shares amounting to
₱16,000.
Inventory includes ₱120,000 goods in transit purchased FOB Destination but excludes ₱48,000 goods in
transit purchased FOB Shipping point.
Additional information:
NAÏVE’s working capital as of December 31, 20x1 is twice as much as the working capital as of January 1,
20x1.
Total equity as of January 1, 20x1 is ₱3,400,000. Profit for the year is ₱4,800,000 while dividends
declared amounted to ₱2,000,000. There were no other changes in equity during the year.
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7. How much is the noncurrent liabilities as of January 1, 20x1?
a. 5,000,000 b. 5,200,000 c. 5,300,000 d. 5,400,000
During the audit of LOQUACIOUS’s 20x1 financial statements, the following were noted by the auditor:
Cash sales in 20x2 amounting to ₱40,000 were inadvertently included as sales in 20x1. LOQUACIOUS
recognized gross profit of ₱12,000 on the sales.
A collection of an ₱80,000 accounts receivable in 20x2 was recorded as collection in 20x1. A cash
discount of ₱4,000 was given to the customer.
During January 20x2, a short-term bank loan of ₱100,000 obtained in 20x1 was paid together with
₱10,000 interest accruing in January 20x2. The payment transaction in 20x2 was inadvertently included
as a 20x1 transaction.
Reclassification adjustment
Use the following information for the next two questions:
In 20x1, LUSTROUS BRIGHT Co. disposed of a foreign operation for which a cumulative translation gain of
₱400,000 is recognized in equity. LUSTROUS Co. is subject to a 30% tax rate.
11. How much is the net of tax reclassification adjustment to other comprehensive income in 20x1?
a. 280,000 b. (280,000) c. 120,000 d. (120,000)
12. How much is the gross of tax effect of the reclassification adjustment to profit or loss in 20x1?
a. 280,000 b. (280,000) c. 400,000 d. (400,000)
Comprehensive income
Use the following information for the next two questions:
The following items were presented for the purpose of determining comprehensive income.
Profit for the year 4,000
Increase in revaluation surplus 2,000
Remeasurements of the net defined benefit liability (asset) - loss (400)
Net change in translation of foreign operation (800)
Dividends declared (200)
Stock rights 600
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Function of expense
Use the following information for the next two questions:
The following are among the expenses incurred by GYRATE REVOLVE Co. during the year.
in ‘000s
Interest expense ₱ 48
Cost of inventories sold 1,200
Insurance expense 200
Advertising expense 40
Freight-out 20
Freight-in 8
Loss on sale of equipment 4
Legal and other professional fees 24
Rent expense (one-half occupied by sales department) 16
Sales commission expense 28
Doubtful accounts expense 32
15. How much are the distribution costs or selling expenses?
a. 96 b. 128 c. 232 d. 316
Gross profit
17. The records of MARAUD PLUNDER Co. showed the following information:
Increase in accounts receivable 200,000
Collections on accounts 1,600,000
Cash sales 240,000
Increase in inventory 80,000
Freight-in 28,000
Freight-out 26,000
Decrease in accounts payable 120,000
Disbursements for purchases 960,000
Purchase discounts 8,000
Gross profit
18. The records of DEADLOCK STANDSTILL Co. showed the following information:
Accounts receivable, net, Jan. 1, 20x1 80,000
Accounts receivable, net, Dec. 31, 20x1 320,000
Accounts receivable turnover 4:1
Inventory, Jan. 1, 20x1 240,000
Inventory, Dec. 31, 20x1 120,000
Inventory turnover 3:1
How much is the gross profit for the year?
a. 240,000 b. 260,000 c. 280,000 d. 300,000
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Cost of sales
19. The records of CANDOR FAIRNESS Co. showed the following information:
Decrease in accounts payable 120,000
Disbursements for purchases 880,000
Increase in raw materials 200,000
Direct labor is 50% of raw materials used in production
Manufacturing overhead is 20% of prime costs
Increase in work-in-process inventory 80,000
Decrease in finished goods inventory 100,000
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How much is the profit for the year?
a. 98,200 b. 104,200 c. 105,200 d. 95,200
Shareholders’ equity
24. The ledger of INDENTATION CUT Co. in 20x1 includes the following:
Share capital 400,000
Share premium 80,000
Retained earnings, appropriated 72,000
Retained earnings, unappropriated 168,000
Revaluation surplus 120,000
Remeasurements of the net defined benefit liability (asset) – gain 60,000
Cumulative net unrealized gain on fair value
changes of investment in FVOCI 92,000
Effective portion of losses on hedging instruments in a
cash flow hedge 40,000
Cumulative translation loss on foreign operation 20,000
Treasury shares, at cost 52,000
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