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CHAPTER 3

THE STATEMENT OF FINANCIAL POSITION


AND NOTES TO THE FINANCIAL STATEMENTS
Discussion Question 15
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.

C
15.
B
C
16.
B
B
17.
E
E
18.
A
A
19.
B
B
20.
F
E
21.
E
A
22.
B
D
23.
E
E
24.
A
C
25.
F
B
26.
B
A
27.
D
F (shown on the face of the statement of changes in equity)

3-1.

(GARNET COMPANY)
Garnet Company
Statement of Financial Position
December 31, 2012
Assets
Current assets
Cash and cash equivalents
Trading securities
Trade and other receivables
Inventory
Non-current assets
Property, plant and equipment
Investment property
Investments in associates
Intangibles
TOTAL ASSETS

Note
P
(5)
(6)
(7)

35,000
61,000
107,000
322,000

P1,483,000
1,000,000
250,000
141,000

Liabilities and Shareholders Equity


Current liabilities
Trade and other payables
(8)
P 336,000
Income tax payable
150,000
Noncurrent liabilities
Bonds payable
(9)
701,000
Deferred tax liability
50,000
Shareholders equity
Share capital
(10)
P 1,534,000
Additional paid in capital
(11)
321,000
Retained earnings
(12)
307,000
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY

P 525,000

2,874,000
P3,399,000

P 486,000

751,000

2,162,000
P3,399,000

Chapter 3 The Statement of Financial Position and Notes to the Financial Statements
Note 5 Trade and other receivables
Accounts receivable
Less allowance for bad debts
Net trade and other receivables

P115,000
8,000
P107,000

Note 6 Property, plant and equipment


Land
Buildings
Less accumulated depreciation
Equipment
Less accumulated depreciation
Total property, plant and equipment

P 300,000
P1,440,000
530,000
P 624,000
351,000

Note 7 Intangibles
Patents
Less accumulated amortization
Trademarks
Less accumulated amortization
Total

P120,000
22,000
P 60,000
17,000

Note 8 Trade and other payables


Accounts payable
Salaries payable
Withholding taxes payable
Total

910,000
273,000
P1,483,000

P 98,000
43,000
P141,000
P236,000
20,000
80,000
P336,000

Note 9 Bonds payable


Bonds payable (due 2014)
Less discount on bonds payable
Total

P 770,000
69,000
P701,000

Note 10 Share capital


Preference share capital, P100 par
Ordinary share capital, P10 par
Share dividends distributable
Total

P 210,000
1,300,000
24,000
P1,534,000

Note 11 Additional paid-in capital


Share premium -preference
Share premium -ordinary
Total

P 81,000
240,000
P321,000

Note 12 Retained earnings


Appropriated
Unappropriated
Total retained earnings

P 45,000
262,000
P307,000

Chapter 3 The Statement of Financial Position and Notes to the Financial Statements
3-2.

(RUBY CORPORATION)
Ruby Corporation
Statement of Financial Position
December 31, 2012
Assets
Current assets
Cash and cash equivalents
Financial assets held for trading (Note 5)
Trade and other receivables (Note 6)
Inventories (Note 7)
Prepaid expenses
Non-current assets held for sale (Note 8)
Non-current assets
Property, plant and equipment (Note 9)
Other financial assets (Note 10)
Intangible assets (Note 11)
TOTAL ASSETS

P 116,000
160,000
308,000
985,000
31,000
210,000
P3,248,000
339,000
182,000

P1,810,000

3,769,000
P5,579,000

Liabilities and Shareholders Equity


Current liabilities
Trade and other payables
Income tax payable
Unearned revenues
Provision for product warranty
Noncurrent liabilities
Bonds payable (Note 12)
Shareholders equity
Share capital (Note 13)
Additional paid in capital (Note 14)
Retained earnings
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY

P 580,000
247,000
62,000
73,000

P 962,000
848,000

P2,028,000
537,000
1,204,000

3,769,000
P5,579,000

Note 5 Financial assets held for trading


Financial assets held for trading, costing P150,000, are reported at market values.
Note 6 Trade and other receivables
Accounts receivable
Less Allowance for bad debts
Net trade receivables

P323,000
15,000
P308,000

Note 7 Inventories (at lower of cost and


NRV)
Finished goods
Goods in process
Raw materials
Total

P416,000
347,000
222,000
P985,000

10

Chapter 3 The Statement of Financial Position and Notes to the Financial Statements
Note 8 Non-current assets held for sale
This classification represents a unit of machinery with carrying amount
of P240,000 and fair value less cost to sell of P210,000. The sale is
expected to be consummated in May 2013.
Note 9 Property, plant and equipment
Land
Land held for future use*
Buildings
Less accumulated depreciation
Machinery
Less accumulated depreciation
Equipment
Less accumulated depreciation
Total

P1,320,000
195,000
P1,824,000
622,000
P 319,000
106,000
P 530,000
212,000

1,202,000
213,000
318,000
P3,248,000

Land held for future use, which conventionally was classified as long-term investment,
is not qualified to be reported as Investment Property under par. 9 of IAS 40. Thus,
property held for future development and subsequent use as owner-occupied property
is part of property, plant and equipment.
Note 10 Other financial assets
Investment in XYZ bonds, at amortized cost
Cash surrender value of life insurance
Total

P250,000
89,000
P339,000

Note 11 Intangible assets


Patents
Less Accumulated amortization
Total

P200,000
18,000
P182,000

Note 12 Bonds payable


Bonds payable
Add Premium on bonds payable
Total

P800,000
48,000
P848,000

Note 13 Share Capital


Preference share capital
Ordinary share capital
Total

P 400,000
1,628,000
P2,028,000

Note 14 Additional paid in capital


Share premium - preference
Share premium - ordinary
Total

P234,000
303,000
P537,000

Retained earnings is adjusted by a decrease of P30,000 representing loss from


measurement to fair value less cost to sell of asset held for sale, thus retained earnings
balance is P1,204,000.

11

Chapter 3 The Statement of Financial Position and Notes to the Financial Statements
3-3.

(DIAMOND COMPANY)
Diamond Company
Statement of Financial Position
December 31, 2012
Assets
Current assets
Cash
Financial assets at fair value through profit or loss
Trade and other receivables (Note 5)
Inventory
Prepaid expenses (Note 6)
Noncurrent assets
Property, plant and equipment (Note 7)
Financial assets at fair value through OCI
Intangible assets
Deferred tax asset
TOTAL ASSETS

P 230,000
320,000
510,000
600,000
130,000
P3,450,000
1,030,000
470,000
70,000

P1,790,000

5,020,000
P6,810,000

Liabilities and Shareholders Equity


Current liabilities
Trade and other payables (Note 8)
Unearned rent
Noncurrent liabilities
Bonds payable (Note 9)
Shareholders equity
Ordinary share capital, P10 par
Share Premium
Retained earnings
Total
Treasury shares, at cost
Accumulated holding gains (losses) investments
through other comprehensive income
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY

P1,390,000
90,000

P1,480,000
1,000,000

P1,200,000
1,040,000
2,300,000
4,540,000
(330,000)
120,000
P6,810,000

Note 5 Trade receivables


Accounts receivable
Less Allowance for uncollectible accounts
Net trade receivables

P590,000
80,000
P510,000

Note 6 Prepaid expenses


Office supplies
Prepaid insurance
Total

P 80,000
50,000
P130,000

Note 7 Property, plant and equipment


Land
Buildings and equipment
Less accumulated depreciation
Total

12

P 810,000
P3,560,000
920,000

2,640,000
P3,450,000

Chapter 3 The Statement of Financial Position and Notes to the Financial Statements

3-4.

Note 8 Trade and other payables


Accounts payable
Salaries payable
Taxes payable
Total

P 990,000
150,000
250,000
P1,390,000

Note 9 Bonds payable


Bonds payable
Less discount on bonds payable
Net

P1,100,000
100,000
P1,000,000

(EMERALD COMPANY)
Emerald Company
Statement of Financial Position
December 31, 2012
Assets
Current assets
Cash
Trading securities
Trade and other receivables
Inventories
Prepaid expenses
Non-current asset held for sale
Noncurrent assets
Property, plant and equipment
Investment property
Other financial assets
Intangibles
TOTAL ASSETS

Note

(7)

P 380,000
485,000
2,780,000
450,000
290,000
1,200,000

(8)
(9)
(10)
(11)

P 5,600,000
2,900,000
1,600,000
960,000

(5)
(6)

P 5,585,000

11,060,000
P16,645,000

Liabilities and Shareholders Equity


Current liabilities
Trade and other payables
(12)
Income taxes payable
Provision for warranties
Noncurrent liabilities
Notes payable
(13)
Bonds payable
(14)
Mortgage payable
Total Liabilities
Shareholders equity
Share capital
(15)
Share premium
Retained earnings
Total
Treasury shares, at cost
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
Retained earnings before adjustment
Unrealized gain on trading securities
Retained earnings after recognition of gain

13

P 1,750,000
720,000
200,000
1,000,000
P 4,430,000
1,600,000
P 1,700,000
1,820,000
3,605,000
P 7,125,000
(180,000)

P 2,670,000

7,030,000
P 9,700,000

6,945,000
P16,645,000
P3,580,000
25,000
P3,605,000

Chapter 3 The Statement of Financial Position and Notes to the Financial Statements
Note 5 Trading securities
The trading securities, costing P460,000, are reported at market value.
Note 6 Trade and other receivables
Accounts receivable
Notes receivable (due July 1, 2013)
Allowance for uncollectible accounts
Net trade and other receivables

P1,850,000
1,000,000
(70,000)
P2,780,000

Note 7 Noncurrent asset held for sale


The non-current asset held for sale represents land that is available for immediate sale
and its carrying amount will be recovered through a sale transaction.
The sale is
highly probable as the plan for its sale has already been completed at yearend. Its fair
value less cost to sell at December 31, 2012 was P1,400,000.
Note 8 Property, plant and equipment
Land
Buildings
Less accumulated depreciation
Equipment
Less accumulated depreciation
Total
Note 9 Investment property
Land
Building
Accumulated depreciation
Total

P1,400,000
P4,340,000
1,800,000
P2,960,000
1,300,000

2,540,000
1,660,000
P5,600,000
P1,200,000

P2,000,000
(300,000)

Note 9 Other financial assets


Investment in Day Corporation bonds (market, P906,000)
Sinking fund for bond retirement
Total
Note 10 Intangibles
Patents
Less accumulated amortization
Trademarks
Less accumulated amortization
Total

P 900,000
700,000
P1,600,000
P820,000
230,000
P520,000
150,000

Note 11 Trade and other payables


Accounts payable
Wages payable
Current portion of mortgage payable
Total

1,700,000
P2,900,000

P 590,000
370,000
P 960,000
P 940,000
410,000
400,000
P1,750,000

Note 12 Notes payable


The notes payable was issued on June 30, 2011 and matures on June 30, 2013. As
of December 31, 2012, the company has negotiated with the lender to extend the
maturity date to June 30, 2014.
Note 13 Bonds payable
Bonds payable
Add premium on bonds payable
Total

P4,000,000
430,000
P4,430,000

14

Chapter 3 The Statement of Financial Position and Notes to the Financial Statements
Note 14 Share capital
Preference share capital
Ordinary share capital
Total
3-5.

3-6.

P 600,000
1,100,000
P1,700,000

(SAPPHIRE COMPANY)
Current assets consist of
Cash (1,240,000 500,000)
Securities held for trading
900,000 + 500,000+ (500,000 x 4.8% x 105/360)
Trade accounts receivable (net of P60,000 allowance for bad debts)
1,220,000 + 50,000 60,000
Notes receivable
Creditors account with debit balance
Merchandise inventory
Total current assets

1,210,000
920,000
100,000
1,360,000
P 5,737,000

Current liabilities consist of


Trade accounts payable (750,000 + 150,000 + 100,000)
Customer deposit
Notes payable (1,500,000 300,000)
Current portion of bonds payable
Accrued interest on bonds payable (2.5M x .10 x 6/12)
Income taxes payable
Employees income tax withheld
Total current liabilities

1,000,000
50,000
1,200,000
500,000
125,000
280,000
40,000
P 3,195,000

P 740,000
1,407,000

(TURQUOISE COMPANY)
Current liabilities consist of
Accounts payable
Mortgage notes payable
Bank notes payable
Interest payable
VAT payable (2,688,000/1.12) x .12
Withholding tax payable
Income taxes payable (186,500 70,000)
Provision for damages
Total current liabilities

P 270,000
1,300,000
100,000
7,500
288,000
120,000
116,500
650,000
P2,852,000

Note: The entire amount of mortgage notes payable is classified as current liabilities
because as of December 31, 2012, the company has no discretion yet to refinance the
obligation on a long-term basis. The refinancing of the mortgage payable in 2013 is nonadjusting event that requires disclosure in the notes to the financial statements.
3-7.

(OPAL COMPANY)
Current assets consists of
Cash (400,000 + 20,000 - 30,000 + 25,000 + 540,000)
Accounts receivable (net) 800,000 + 30,000 150,000
Inventories (1,200,000 40,000)
Prepaid insurance (250,000 50,000)
Total current assets at December 31, 2010

15

P 955,000
680,000
1,160,000
200,000
P2,995,000

Chapter 3 The Statement of Financial Position and Notes to the Financial Statements
OR
Reported total current assets
Bank overdraft
Cash for purchase of plant site
Unreplenished petty cash expenses
Total current assets at December 31, 2010
3-8.

P4,580,000
20,000
(1,500,000)
(15,000)
P2,995,000

(AQUAMARINE COMPANY)

Reported totals
(a) Sinking fund cash
(b) Treasury shares
(c) Cash fund for taxes
(d) Advances and
commissions payable
(e) Provision for damages
Correct totals

Current
assets
P3,500,000

Non-current
assets
P8,000,000
380,000
(500,000)

Current
liabilities
P2,400,000

140,000

140,000

210,000

210,000
168,000*
P2,918,000

P3,850,000

P7,880,000

Non-current
liabilities
P2,700,000
380,000

P3,080,000

*Alternatively, if the amount of P180,000 was already included in the current liabilities
total of P2,400,000, an adjustment deducting P12,000 from current liabilities is appropriate
in order to bring the provision for damages to the correct amount of P168,000.
3-9.

(PERIDOT COMPANY)

Reported amounts
(a) Post dated check recorded
(b) Increase in market value
(c) Goods shipped FOB destination
(d) Goods out on consignment
Correct balances, December 31, 2012

Cash
P536,000
80,000

Trading
securities
P500,000

Accounts
receivable
P3,285,000

Inventory
P3,500,000

50,000
(180,000)
P616,000

P550,000

P3,105,000

120,000
135,000
P3,755,000

3-10. (ZIRCON COMPANY)


Current assets:
Accounts receivable (net)=148,000 12,000
Citibank current account
Inventories
Office supplies
Total current assets
Current liabilities:
Accounts payable
Income tax payable
Advances from suppliers
Accrued interest on bonds payable
Provision for warranties
Working capital

16

P136,000
98,000
217,500
3,500
P455,000
P124,000
16,000
150,000
17,000
60,000

367,000
P 88,000

Chapter 3 The Statement of Financial Position and Notes to the Financial Statements
3-11.
1.
2.
3.
4.

C
A
C
A

5.
6.
7.
8.

B
C
A
A

9.
10.

A
B

MC. 21
MC 22
MC 23
MC 24
MC 25

D
C
C
A
B

MULTIPLE CHOICE QUESTIONS


MC1
MC2
MC3
MC4
MC5
MC6
MC7
MC8
MC9
MC10

D
A
A
A
A
C
D
D
C
C

MC26
MC27
MC28
MC29
MC30

A
B
B
D
C

MC31

MC32
MC33
MC34
MC35
MC36
MC37
MC39

B
C
A
A
A
C
A

MC40
MC38
MC41
MC42
MC43

B
D
D
A
C

MC44
MC45

B
C

MC46
MC47
MC48
MC49
MC50
MC51
MC52

B
B
C
B
A
C
B

MC11
MC12
MC13
MC14
MC15
MC16
MC17
MC18
MC19
MC20

B
D
C
D
B
C
D
A
C
C

(200,000-50,000) + 120,000 + 79,000 + (280,000 60,000) 1,000=569,000


3,740,000 + 50,000 4,000 + 100,000 180,000 + 50,000 = 3,756,000
2,680,000 + 50,000 + 100,000 +50,000 1,000,000 = 1,880,000
4,014,000 9,000 - 150,000 = 3,855,000
(124,000 + 13,000) + 90,000 + 92,000 + (122,000 + 7,000 6,000) + 136,000
+ 12,000 = 590,000
13,000 + (75,000 + 12,000 + 15,000) + 7,000 + (150,000 30,000) + 4,000 +
(250,000/5) + 28,000 = 324,000
(1,125,000+65,000) + 136,000 + 96,000 + 150,000 + (750,000/5)=1,722,000
376,000 + (2,000,000+100,000 8,000) = 2,468,000
360,000 + 480,000 30,000 12,000 + 90,000 + 120,000 = 1,008,000
450,000 + 750,000 90,000 + 240,000 = 1,350,000
2,160,000 250,000 + 224,000 + 830,000 + 970,000 = 3,934,000
980,000 + 108,000 + 720,000 = 1,808,000
(490,000 25,000) + (380,000 200,000) + (1,250,000 500,000) + 100,000 +
900,000 + 80,000 = 2,475,000
25,000 + 200,000 + 500,000 + 200,000 + 3,750,000 = 4,675,000
160,000 + 50,000 + 110,000 + 300,000 + 10,000 = 630,000
675,000 + (2,695,000 500,000) + 2,185,000 = 5,055,000
1,801,000 + (654,000 475,000) = 1,980,000
13,360,000 11,180,000 654,000 = 1,526,000;
1,526,000 + 3,350,000 = 4,876,000
(1,200,000 200,000) + 1,500,000 + 25,000 = 2,525,000
500,000 + 550,000 250,000 = 800,000 + 1,000,000 + 250,000 + 450,000 =
2,500,000
150,000 + (2,100,000 500,000 80,000) + (1,600,000 200,000)=3,070,000
(550,000 95,000) + 800,000 + (800,000 X 12% X 7/12) + 6,500 = 1,317,500
8,700,000 (4,000,000 2,000,000 + 5,000,000 1,000,000) =2,700,000
175,000 + 136,000 + 820,000 + 153,000 + 366,000 = 1,650,000
250,000 + 140,000 + 228,000 + 248,000 = 866,000
525,000 400,000 + 300,000 + 1,020,000 + 1,200,000 + 450,000=3,095,000
(950,000 x 2.50) + 2,500,000 + (10M x 12% x 3/12) + (12M + 30M 25M) =
22,175,000

17