CHAPTER 1 Problem 1-3 (IAA)

STATEMENT OF FINANCIAL POSITION Pamela Company provided the following adjusted account balances on December 31, 2013:
Problem 1-1 (IFRS) Wages payable 250,000
The general ledger trial balance of Darwin Company included the following accounts on December 31, 2013: Cash 200,000
Inventory, including inventory expected in the ordinary course of operations to Mortgage payable 1,500,000
be sold beyond 12 months amounting to P700,000 1,000,000 Dividends payable 150,000
Accounts Receivable 1,200,000 Prepaid rent 100,000
Prepaid Insurance 100,000 inventory 800,000
Financial assets held for trading 200,000 Sinking fund 500,000
Financial assets at fair value through other comprehensive income 800,000 Short-term investments 300,000
Cash 300,000 Investment in associate 2,000,000
Deferred tax asset 150,000 Taxes payable 220,000
Bank overdraft 250,000 Accounts payable 240,000
What amount should be reported as total current assets on December 31, 2013? Accounts receivable 350,000
a. 2,800,000 What total amount should be reported as current assets on December 31, 2013?
b. 2,550,000 a. 2,250,000
c. 3,600,000 b. 1,750,000
d. 2,100,000 c. 3,750,000
Solution 1-1 Answer a d. 4,250,000
Inventory 1,000,000 Solution 1-3 Answer b
Accounts receivable 1,200,000 Cash 200,000
Prepaid insurance 100,000 Prepaid rent 100,000
Financial assets held for trading 200,000 Inventory 800,000
Cash 300,000 Short-term investments 300,000
Total current assets 2,800,000 Account receivable 350,000
In the absence of statement to the contrary, financial assets at fair value through other comprehensive income shall be Total current assets 1,750,000
classified as noncurrent. PAS 1 and PAS 12 provide that deferred tax asset is a noncurrent asset. The bank overdraft is
classified as current liability. Problem 1-4 (AICPA Adapted)
Petite Company provided the following data on December 31, 2013:
Problem 1-2 (AICPA Adapted) Cash 5,000,000
Violago Company provided the following account balances on December 31, 2013: Financial assets at fair value (including long-term investment of P500,000 in
Accounts receivable 1,600,000 ordinary shares of Ayala Company 2,000,000
Financial assets at fair value through profit or loss 500,000 Inventories (including goods received on consignment of P200,000) 800,000
Financial assets at amortized cost 1,300,000 Prepaid expenses (including a deposit of P50,000 made on inventories to be
Cash 1,100,000 delivered in 18 months) 150,000
Inventory 3,000,000 Property, plant, and equipment (excluding P300,000 of equipment still in use, but
Equipment and furniture 2,500,000 fully depreciated) 10,000,000
Accumulated depreciation 1,500,000 Goodwill (based on estimate by the president) 1,000,000
Patent 400,000 Total assets 18,950,000
Prepaid expenses 100,000
Equipment classified as held for sale 2,000,000
Cash in general checking account 3,500,000
In the December 31, 2013 statement of financial position, what total amount should be reported as current assets?
Cash in fund to be used to retire bonds in 2015 1,000,000
a. 6,300,000
Cash held to pay value added taxes 500,000
b. 8,300,000
Total cash 5,000,000
c. 8,200,000
d. 9,600,000 What total amount of current assets should be reported on December 31, 2013?
Solution 1-2 Answer b a. 6,250,000
Accounts receivable 1,600,000 b. 6,200,000
Financial assets at fair value through profit or loss 500,000 c. 7,200,000
Cash 1,100,000 d. 7,250,000
Inventory 3,000,000 Solution 1-4 Answer b
Prepaid expenses 100,000 Cash (3,500,000 + 500,000) 4,000,000
Equipment classified as held for sale 2,000,000 Financial assets (2,000,000 - 500,000) 1,500,000
Total current assets 8,300,000 Inventories (800,000 - 200,000) 600,000
Prepaid expenses (150,000 - 50,000) 100,000
The financial assets at amortized cost shall be classified as noncurrent. Financial assets at amortized cost include
Total current assets 6,200,000
investment in bonds and other debt instruments.
Under PFRS 5, a noncurrent asset classified as held for sale should be reported as current asset.
Problem 1-5 (IAA) Solution 1-7 Answer a
Cara Company provided the following information: Liabilities 2,000,000
1/1/2013 12/31/2013 Share capital 7,500,000
Current assets 240,000 ? Retained earnings (8,200,000 - 6,400,000 -300,000) 1,500,000
Property, plant, and equipment 1,600,000 1,700,000 Total liabilities and shareholders’ equity 11,000,000
Current liabilities ? 130,000
Noncurrent liabilities 580,000 ? Problem 1-8 (AICPA Adapted)
All assets and liabilities of the entity are reported at year-end. Working capital of P92,000 remained unchanged from 2012 Gold Company provided the following trial balance on December 31, 2013:
to 2013. Net income in 2013 was P64,000. No dividends were declared during 2013 and there were no other changes in Cash overdraft 100,000
owners’ equity. What amount should be reported as noncurrent liabilities on December 31, 2013? Accounts receivable, net 350,000
a. 340,000
Inventory 580,000
b. 432,000
c. 580,000 Prepaid expenses 120,000
d. 616,000 Land classified as held for sale 1,000,000
Solution 1-5 Answer d Property, plant and equipment, net 950,000
Current assets - January 1, 2013 240,000
Accounts payable and accrued expenses 320,000
Property, plant and equipment - January 1, 2013 1,600,000
Total assets - January 1, 2013 1,840,000 Ordinary share capital 250,000
Current liabilities (240,000 - 92,000) (148,000) Share premium 1,500,000
Noncurrent liabilities (580,000) Retained earnings 830,000
Equity - January 1, 2013 1,112,000
Net income in 2013 64,000 3,000,000 3,000,000
Equity - December 31, 2013 1,176,000 Checks amounting to P300,000 were written to vendors and recorded on December 29,2013, resulting in a cash overdraft
of P100,000. The checks were mailed on January 15, 2014. Land classified as held for sale was sold for cash on January 31,
Current assets - December 31, 2013 (130,000 + 92,000) 222,000 2014. The entity issued the financial statements on March 31, 2014. On December 31, 2013, what total amount should be
Property, plant and equipment - December 31, 2013 1,700,000 reported as current assets?
a. 2,250,000
Total assets - December 31, 2013 1,922,000
b. 2,050,000
Current liabilities - December 31, 2013 (130,000)
c. 1,950,000
Noncurrent liabilites - December 31, 2013 (SQUEEZE) (616,000)
d. 1,250,000
Equity - December 31, 2013 1,176,000
Solution 1-8 Answer a
Cash (300,000 - 100,000 overdraft) 200,000
Problem 1-6 (AICPA Adapted) Accounts receivable 350,000
Rice Company was incorporated on January 1, 2013, with P5,000,000 from the issuance of share capital and borrowed Inventory 580,000
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 Prepaid expenses 120,000
dividend. No additional activities affected shareholder’ equity in 2013. On December 31, 2013, the liabilities had increased Land classified as held for sale 1,000,000
to P1,800,000. On December 31, 2013, what amount should be reported as total assets? Total current assets 2,250,000
a. 6,500,000
b. 9,300,000
Problem 1-9 (AICPA Adapted)
c. 8,800,000
Arabian Company reported the following current assets on December 31, 2013:
d. 6,800,000
Cash 4,300,000
Solution 1-6 Answer c
Accounts receivable 7,500,000
Liabilities 1,800,000
Inventory 4,000,000
Share capital 5,000,000
Deferred tax asset 1,200,000
Retained earnings (net income of P2,500,000 less dividends of
P500,000) 2,000,000 17,000,000
Total liabilities and shareholders’ equity 8,800,000 An analysis of the accounts receivable disclosed that accounts receivable comprised the following:
Trade accounts receivable 5,000,000
Problem 1-7 (AICPA Adapted) Allowance for doubtful accounts (500,000)
Mirr Company was incorporated on January 1, 2013, with proceeds from the issuance of P7,500,000 in share capital and Selling price of Arabian Company’s unsold goods sent to Tar Company
borrowed funds of P1,100,000. During the first year, revenue from sales and consulting amounted to P8,200,000, and on consignment at 150% of cost and excluded from Arabian’s ending
operating costs and expenses totaled P6,400,000. On December 15, 2013, the entity declared a P300,000 dividend, inventory 3,000,000
payable to shareholders on January 15, 2014. No additional activities affected shareholders’ equity in 2013. The liabilities 7,500,000
increased to P2,000,000 by December 31, 2013. On December 31, 2013, what amount should be reported as total assets? On December 31, 2013, what amount should be reported as total current assets?
a. 11,000,000 a. 16,000,000
b. 11,300,000 b. 15,300,000
c. 10,100,000 c. 15,800,000
d. 12,100,000 d. 14,800,000
 from reported inventory
Total accounts receivable 2,500,000

Solution 1-9 Answer d What total amount of current assets should be reported on December 31, 2013?
Cash 4,300,000 a. 4,900,000
Accounts receivable 5,000,000 b. 4,830,000
Allowance for doubtful accounts (500,000) c. 4,780,000
Inventory (4,000,000 + 2,000,000) 6,000,000 d. 4,630,000
Total current assets 14,800,000 Solution 1-11 Answer b
The selling price of the unsold goods out on consignment is excluded from accounts receivable but the cost of the goods Current assets per book 5,100,000
shall be included in inventory. The cost of goods out on consignment is P3,000,000 divided by 150% or P2,000,000. Outstanding checks (70,000)
Customers’ deposit 50,000
Problem 1-10 (PHILCPA Adapted) Overstatement of accounts receivable (750,000)
Caticlan Company provided the following data on December 31, 2013: Understatement of inventory (750,000/150%) 500,000
Cash, including sinking fund of P500,000 2,000,000 Total current assets 4,830,000
Notes receivable 1,200,000
Note receivable discounted 700,000 Problem 1-12 (AICPA Adapted)
Accounts receivable - unassigned 3,000,000 East Company reported the following current assets at year end:
Accounts receivable - assigned 800,000 Cash 3,200,000
Equity of assignee in accounts receivable assigned 500,000 Accounts receivable 2,000,000
Inventroy, including P600,000 cost of goods in transit purchased FOB Inventory 2,800,000
destination. The goods were received on January 3, 2014 2,800,000 Deferred charges 200,000
Allowance for doubtful accounts 100,000
8,200,000
What total amount of current assets should be reported in the statement of financial position on December 31, 2013?
a. 7,900,000 The accounts receivable consisted of the following items:
b. 8,000,000 Customers’ accounts 1,420,000
c. 7,400,000 Employees’ account-current 240,000
d. 7,700,000 Advances to subsidiary 260,000
Solution 1-10 Answer a Allowance for uncollectible accounts (120,000)
Cash (2,000,000 - 500,000) 1,500,000 Claim against shipper for goods lost in transit 200,000
Notes receivable 1,200,000 2,000,000
Note receivable discounted (700,000) What amount should be reported as total current assets?
Accounts receivable - unassigned 3,000,000 a. 7,740,000
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 equity of the assignee in assigned accounts shall not be offset against the assigned receivable but included in current
liabilities.

Problem 1-11 (AICPA Adapted)

On December 31, 2013, Ivan Company showed the following current assets:
Cash 500,000
Accounts receivable 2,500,000
Inventory 2,000,000
Prepaid expenses 100,000
Total current assets 5,100,000

Cash on hand including customer’s postdated check of P20,000 and

employee IOU of P10,000 130,000
Cash in bank per bank statement (outstanding checks on December 31,
2013, P70,000) 370,000
Total cash 500,000

Customers’ debit balances, net of customers’ deposit of P50,000 1,900,000

Allowance for doubtful accounts (150,000)
Sales price of goods invoiced to customers at 150% of cost on
December 29, 2013 but delivered on January 5, 2014 and excluded 750,000