PRESENTATION OF FINANCIAL STATEMENTS. ………………1
CHAPTER 37: MULTIPLE CHOICE – COMPUTATIONAL (SET B) – (FOR CLASSROOM INSTRUCTION
... [Show More] PURPOSES)..............1
CHAPTER 37: THEORY OF ACCOUNTS REVIEWER.......................................................................................................8
CHAPTER 37 - SUGGESTED ANSWERS TO THEORY OF ACCOUNTS QUESTIONS..............................................................54
CHAPTER 38
REVENUE......................................................................................55
CHAPTER 38: MULTIPLE CHOICE – COMPUTATIONAL (SET B) – (FOR CLASSROOM INSTRUCTION PURPOSES)...........55
CHAPTER 38: THEORY OF ACCOUNTS REVIEWER.....................................................................................................59
CHAPTER 38 - SUGGESTED ANSWERS TO THEORY OF ACCOUNTS QUESTIONS..............................................................73
CHAPTER 39
NON-CURRENT ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS 74
CHAPTER 39: MULTIPLE CHOICE – COMPUTATIONAL (SET B) – (FOR CLASSROOM INSTRUCTION PURPOSES)...........74
CHAPTER 39: THEORY OF ACCOUNTS REVIEWER.....................................................................................................79
CHAPTER 39 - SUGGESTED ANSWERS TO THEORY OF ACCOUNTS QUESTIONS............................................................100
CHAPTER 40
ACCOUNTING POLICIES, CHANGES IN ESTIMATES AND ERRORS 101
CHAPTER 40: MULTIPLE CHOICE – COMPUTATIONAL (SET B) – (FOR CLASSROOM INSTRUCTION PURPOSES)..........101
CHAPTER 40: THEORY OF ACCOUNTS REVIEWER...................................................................................................104
CHAPTER 40 - SUGGESTED ANSWERS TO REVIEW THEORY QUESTIONS....................................................................123
CHAPTER 41
STATEMENT OF CASH FLOWS..............................................124
CHAPTER 41: MULTIPLE CHOICE – COMPUTATIONAL (SET B) – (FOR CLASSROOM INSTRUCTION PURPOSES).........124
CHAPTER 41: THEORY OF ACCOUNTS REVIEWER...................................................................................................127
CHAPTER 41 - SUGGESTED ANSWERS TO REVIEW THEORY QUESTIONS....................................................................148
CHAPTER 42
EVENTS AFTER THE REPORTING PERIOD.......................149
CHAPTER 42: MULTIPLE CHOICE – COMPUTATIONAL (FOR CLASSROOM INSTRUCTION PURPOSES)...........................149
CHAPTER 42: THEORY OF ACCOUNTS REVIEWER...................................................................................................150
CHAPTER 42 - SUGGESTED ANSWERS TO THEORY OF ACCOUNTS QUESTIONS............................................................156
CHAPTER 43
RELATED PARTY DISCLOSURES..........................................157
CHAPTER 43: MULTIPLE CHOICE – COMPUTATIONAL (FOR CLASSROOM INSTRUCTION PURPOSES)...........................157
CHAPTER 43: THEORY OF ACCOUNTS REVIEWER...................................................................................................157
CHAPTER 43 - SUGGESTED ANSWERS TO THEORY OF ACCOUNTS QUESTIONS............................................................163
CHAPTER 44
OPERATING SEGMENTS.........................................................164
CHAPTER 44: MULTIPLE CHOICE – COMPUTATIONAL (SET B) – (FOR CLASSROOM INSTRUCTION PURPOSES).........164
CHAPTER 44: THEORY OF ACCOUNTS REVIEWER...................................................................................................165
CHAPTER 44 - SUGGESTED ANSWERS TO THEORY OF ACCOUNTS QUESTIONS............................................................177
CHAPTER 45
INTERIM FINANCIAL REPORTING......................................178
CHAPTER 45: MULTIPLE CHOICE – COMPUTATIONAL (SET B) – (FOR CLASSROOM INSTRUCTION PURPOSES).........178
CHAPTER 45: THEORY OF ACCOUNTS REVIEWER...................................................................................................182
CHAPTER 45 - SUGGESTED ANSWERS TO REVIEW THEORY QUESTIONS....................................................................194
CHAPTER 46
DEVELOPMENT STAGE ENTITIES.......................................195
CHAPTER 46: THEORY OF ACCOUNTS REVIEWER.....................................................................................................195
CHAPTER 46 - SUGGESTED ANSWERS TO REVIEW THEORY QUESTIONS....................................................................197
CHAPTER 47
CASH BASIS TO ACCRUAL BASIS OF ACCOUNTING........198
CHAPTER 47: MULTIPLE CHOICE – COMPUTATIONAL (SET B) – (FOR CLASSROOM INSTRUCTION PURPOSES).........198
CHAPTER 47: THEORY OF ACCOUNTS REVIEWER.........................................................ERROR! BOOKMARK NOT DEFINED.
CHAPTER 47 - SUGGESTED ANSWERS TO THEORY OF ACCOUNTS QUESTIONS..................ERROR! BOOKMARK NOT DEFINED.
CHAPTER 48
FINANCIAL REPORTING IN HYPERINFLATIONARY ECONOMIES 202
CHAPTER 48: MULTIPLE CHOICE – COMPUTATIONAL (SET B) – (FOR CLASSROOM INSTRUCTION PURPOSES).........202
CHAPTER 48: THEORY OF ACCOUNTS REVIEWER...................................................................................................210
CHAPTER 48 - SUGGESTED ANSWERS TO THEORY OF ACCOUNTS QUESTIONS............................................................222
CHAPTER 49
PFRS FOR SMALL AND MEDIUM-SIZED ENTITIES (SMES)223
CHAPTER 49: MULTIPLE CHOICE – COMPUTATIONAL (FOR CLASSROOM INSTRUCTION PURPOSES)...........................223
CHAPTER 49: THEORY OF ACCOUNTS REVIEWER (W/ PROBLEMS INCLUDED)..........................................................227
CHAPTER 49 - SUGGESTED ANSWERS TO THEORY OF ACCOUNTS QUESTIONS............................................................278
Chapter 37
Presentation of Financial Statements
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
How much is the total current assets?
a. 380,000 b. 500,000 c. 360,000 d. 384,000
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
How much is the total current liabilities?
a. 384,000 b. 456,000 c. 584,000 d. 364,000
Current and noncurrent liabilities
3. The ledger of COURIER MESSENGER Co. as of December 31, 20x1 includes the
following:
10% Note payable 160,000
12% Note payable 240,000
14% Mortgage note
payable 120,000
1
Interest payable -
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.
How much is the total current liabilities?
a. 280,000 b. 310,000 c. 316,000 d. 288,400
Current and noncurrent liabilities
4. The ledger of SQUAMOUS SCALY Co. as of December 31, 20x1 includes the following:
15% Note payable 100,000
16% Bonds payable 200,000
18% Serial bonds
payable 400,000
Interest payable -
Additional information:
SQUAMOUS Co.’s financial statements were authorized for issue on April 15, 20x2.
The 15% note payable was issued on January 1, 20x1 and is due on January 1, 20x5. The
note pays annual interest every year-end. The agreement with the lender provides that
SQUAMOUS Co. shall maintain an average current ratio of 2:1. If at any time the current
ratio falls below the agreement, the note payable will become due on demand. As of the
3rd quarter in 20x1, SQUAMOUS’s average current ratio is 0.50:1. Immediately,
SQUAMOUS informed the lender of the breach of the agreement. On December 31, 20x1,
the lender gave SQUAMOUS a grace period ending on December 31, 20x2 to rectify the
deficiency in the current ratio. SQUAMOUS promised the creditor to liquidate some of
its long-term investments in 20x2 to increase its current ratio.
The 16% bonds are 10-year bonds issued on December 31, 1992. The bonds pay annual
interest every year-end.
The 18% serial bonds are issued at face amount and are due in semi-annual
installments of ₱40,000 every April 1 and September 30. Interests on the bonds are also
due semi-annually. The last installment on the bonds is due on September 30, 20x7.
How much is the total current liabilities?
a. 218,000 b. 200,000 c. 280,000 d. 298,000
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
2
Land held for sale 112,000
Property, plant, and
equipment 200,000
Totals 800,000 480,000
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.
Accounts receivable consists of the following:
Accounts receivable 160,000
Allowance for uncollectibility ( 20,000)
Credit balance in customers’ accounts ( 12,000)
Selling price of unsold goods sent on consignment
to FRAIL, Inc. at 120% of cost and excluded from
REEDY’s inventory 48,000
Accounts receivable, net 176,000
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.
How much is the adjusted working capital?
a. 430,000 b. 406,000 c. 442,000 d. 426,000
Working capital
6. The ledger of NEOPHYTE BEGINNER Co. as of December 31, 20x1 includes the
following:
Assets
3
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
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.
How much is the working capital?
a. 394,000 b. 420,000 c. 349,000 d. 402,000
Reconstruction of financial statement
Use the following information for the next three questions:
The ledger of NAÏVE UNAFFECTEDLY SIMPLE Co. in 20x1 includes the following:
Jan. 1,
20x1
Dec. 31,
20x1
Current assets 2,400,000 ?
Noncurrent assets 8,000,000 ?
Current liabilities 1,800,000 2,000,000
4
Noncurrent
liabilities ? 6,000,000
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.
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
8. How much is the current assets as of December 31, 20x1?
a. 3,200,000 b. 3,400,000 c. 3,600,000 d. 4,200,000
9. How much is the noncurrent assets as of December 31, 20x1?
a. 9,000,000 b. 11,000,000 c. 8,000,000 d. 12,000,000
Reconstruction of financial statements
10. The ledger of LOQUACIOUS TALKATIVE Co. in 20x1 includes the following:
Cash 400,000
Accounts receivable 800,000
Inventory
2,000,00
0
Accounts payable 600,000
Note payable 200,000
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.
How much is the adjusted working capital as of December 31, 20x1?
a. 2,420,000 b. 2,482,000 c. 2,342,000 d. 2,402,000
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:
5
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 [Show Less]