1.

Nia Company provided the following current sections of the unadjusted financial position on
December 31, 2017:

Current Assets Current Liabilities

Cash 2,000,000 Trade accounts payable (net
of a debit balance of
P50,000) 2,450,000
Accounts Receivable 3,000,000 Interest payable 100,000
Inventory 1,900,000 Income tax payable 300,000
Deferred Charges 100,000 Money claims of the union,
pending final decision 500,000
Mortgage payable, due in
three annual installments 3,000,000

What total amount of current liabilities should be reported on Dec. 31, 2017?

2. Libis Company reported the following information on Dec. 31, 2018.

Equipment 840,000 Equity 1,555,000
Patent 210,000 Non-current Liabilities 750,000
Inventory 600,000 Accounts payable 440,000
Accounts Receivable, net 405,000 Total 2,745,000
Cash 690,000
Total 2,745,000

 Cash included P12,000 in petty cash fund and P120,000 in bond sinking fund.
 The net accounts receivable is comprised of debit balance – P520,000; credit balance –
P80,000; and allowance for doubtful accounts – P35,000.
 Inventory costing P53,000 was shipped out on consignment on December 31, 2018. The
inventory balance did not include the consigned goods but an account receivable
balance of P53,000 was recognized on the consigned goods.
 Income tax payable of P90,000 was accrued on December 31, 2018. The entity had set
up a cash fund to meet this obligation. This cash fund was not included in the cash
balance but was offset against the income tax payable account.

What amount of current liabilities should be reported on December 31, 2018?

3. Hershey Company offers a coffee mug as a premium for every ten candy bar wrappers
presented by customers together with P10. The purchase price of each mug is P9 and it costs P6
to mail each mug.

2017 2018
Coffee mugs purchased 720,000 800,000
Candy bars sold 5,600,000 6,750,000
Wrappers redeemed 2,800,000 4,200,000
2017 wrappers expected to be redeemed in 2018 2,000,000
 2018 wrappers expected to be redeemed in 2019 2,700,000

What is the premium expense for 2018?

What is the premium liability on December 31, 2018?

4. Noven Inc. places a coupon in each box of its product. Customers may send in ten coupons and
P3.00 and the company will send them a CD. Sufficient CDs were purchased at P5.40 a piece.
During 2017, 1,260,000 boxes were sold. It was estimated that a total of 5% of the coupons will
be redeemed. In 2017, 18,000 coupons were redeemed.

How much is the premium expense for 2017?

How much is the liability for premiums outstanding as of Dec. 31, 2017?

5. Happy company has the following information relating to its warranty obligation: In year 2017,
goods are sold for P10,000,000. Experience indicates that 90% of the products sold required no
warranty repairs; 6% of products sold require minor repairs costing 30% of the sales price; and
4% of products sold require major repairs or replacements costing 70% of sales price. The
expenditures for warranty repairs and replacements for products sold in 2017 are expected to
be made 60% in 2018, 30% in 2019, and 10% in 2020 in each case at the end of the period.
Because the cash flows already reflect the probabilities of the cash flows, and assuming there
are no other risks or uncertainties that must be reflected, to determine the present values of
those cash flows, the entity uses a risk-free discount rate based on government bonds with the
same term as expected cash flows (6% for one-year bonds and 7% for two-year and three-year
bonds). What amount of provision on warranty should Happy Company report in its statement
of financial position for the year ended December 31, 2017?

6. As of December 31, 2017, the carrying amount of Manor’s unfunded obligation for long-service
leave was P500,000 of which P200,000 are entitled to take a leave in the twelve months
following the end of the reporting period December 31, 2017. The balance of P300,000 is in
respect of leave that employees are entitled to take only after the end of the next annual
reporting period. Manor Company anticipates that only 75% of its employees will take the leave
due during the next annual reporting period, that is, approximately P50,000 of the P200,000 is
expected to be carried forward. What amount of current liability for long service leave should
Manor Company report in its December 31, 2017 statement of financial position?

7. Dreamer Corporation has an employee benefit plan for compensated absences that gives
employees 10 paid vacation days and 10 paid sick days. Both vacation and sick days can be
carried over indefinitely. Employees can elect to receive payment in lieu of vacation days;
however, no payment is given for sick days not taken. At December 31, 2017 Dreamer’s
unadjusted balance of liability for compensated absences was P210,000. Dreamer estimated
that there were 150 vacation days and 75 sick days available at December 31, 2017. Dreamer’s
employees earn an average of P1,000 per day. In its December 31, 2017 balance sheet, what
amount of liability for compensated absences is Dreamer required to report?