NAME 1 NOTES TO FINANCIAL STATEMENTS: NOTES TO FINANCIAL STATEMENTS:

Note 1 Cash and Cash Equivalent Note 10 Bond payable

DATE SECTION Statement of Financial Position
2
CIRI COMPANY's summary of account balances ASSETS
on December 31, 2019. Current Assets
Note 11 Defined Benefit Obigation
Cash 2,850,000 CASH & CASH EQUIVALENTS 3 Note 2 Trade and Other Receivables
Financial Asset at Fair Value 690,000 4
Call Option 10,000 5
Trade Accounts Receivable 1,000,000 6
Prepaid Expenses 130,000 PREPAID EXPENSES 7
Inventory 880,000 Total Current Assets 8
Deferred Tax Asset 120,000 Noncurrent Assets
Land 1,200,000 PROPERTY, PLANT & EQUIPMENT 9 Note 3 Inventories

Right of Use Asset 630,000 10

Investment in Associate 425,000 11
Goodwill 240,000 INTANGIBLE ASSETS 12
Note 4 Property Plant & Equipment
Trademark 160,000 13 Note 12 Redeemable Preference Shares
Machinery and Equipment 2,100,000 Total Noncurrent Assets 14
Accumulated Depreciation 400,000 Total Assets 15

Premium on Bonds Payable 200,000 LIABILITITES AND SHAREHOLDERS' EQUITY Note 13 Share Capital
Accounts Payable 830,000 Current Liabilities Note 5 Long Term Investment
Accrued Expenses 175,000 16
Estimated Warranty Liability 125,000 CURRENT PROVISIONS 17
Cash Dividends Payable 240,000 18
Income Tax Payable 215,000 19
Note 6 Intangible Assets
Lease Liability 606,400 20
Prepaid Accrued Benefit Cost 90,000 Total Current Liabilities 21 Note 14 Reserves
Note Payable due July 1, 2020 560,000 Noncurrent Liabilities
Bonds Payable 2,400,000 LEASE LIABILITY - noncurrent portion 22 Note 7 Trade and Other Payables
8% Redeemable Preference Share 250,000 23
Share Capital 3,200,000 24
Retained Earnings 903,600 25
R.E appropriated for contingencies 240,000 Total Noncurrent Liabilities 26
Note 15 Retained Earnings
Total Liabilities 27
Retained Earnings - Unadjusted Balance 903,600
REQUIREMENTS: Shareholders' Equity
1 Prepare entries to properly reclassify, adjust or correct SHARE CAPITAL 28
Note 8 Current Provisions
mistated accounts needed to present the financial position 29
of CIRI COMPANY RETAINED EARNINGS 30
2 Prepare necessary notes for each line item presented in the Total 31
Statement of Financial Position. Less: 32
3 Prepare a classified and condensed Statement of Total Shareholders' Equity 33
Financial Position as at year ended December 31, 2019. Total Liabilities and Shareholders' Equity 34
ADDITIONAL INFORMATION: The accounts payable of P830,000 is shown net of supplier’s account with debit balance for
The cash account include the following P60,000.
Cash in Bank – MetroBank 575,000 On January 1, 2019, Ciri Co entered into a lease agreement for an equipment with an annual
Cash in Bank – MayBank (25,000) rental payment of P200,000 to be paid every December 31, starting December 31, 2019.
Time Deposit – MayBank 800,000 The lease contains neither a transfer of title to the lessee nor a purchase option. The equipment
Sinking Fund – for payment of bonds 1,450,000 has residual value of P300,000 at the end of the 5-year lease period but is unguaranteed by the
Petty Cash Fund – expenses vouchers of P14,000 and employee IOUs lessee. The economic life of the equipment is 8 years.
of P9,000 (no replenishment was made at the end of the year) 50,000 The implicit rate is 12% after considering the unguaranteed residual value. (2 decimal places)

The financial assets at fair value were all acquired during the year include the following: At the beginning of current year, the entity’s memorandum records showed fair value of plan
Acquisition Cost Fair Value – Dec 31, 2019 assets at P470,000 and projected benefit obligation at P560,000. The entity revealed the
Ciri Company shares 250,000 240,000 following information for the current year:
Geralt Company shares at FV-P/L 200,000 250,000 Current service cost 82,000 Actual return on plan assets 90,000
Yennefer Co shares at FV-OCI 240,000 200,000 Past service cost 35,000 Discount rate 10%
No adjustments had been made to recognize the changes in fair value at the end of the year. No recognition of defined benefit cost was made because there was no contribution to the plan.

The call option was the option premium paid on November 15, 2019 used as a protection against
the increase in price of the inventory entered with a financial speculator to purchase 100,000
units @ P7.50 per unit on June 1, 2020. The market price is P7.80 on December 31, 2019. The
derivative contract is designated as cash flow hedge.
The Trade Accounts Receivable comprised the following:
Accounts Receivable (net of allowance of P120,000 and customer’s 520,000
account with credit balance of P40,000)
Selling Price of Ciri Company’s goods out on consignment at 125% of cost 300,000
Subscription Receivable (4,000 shares were subscribed
at P120 per share during the year) 180,000
Based on the physical inventory at year-end, Ciri Co determined that there 110,000 units @ an
average cost of P8.00 per unit. The replacement unit cost of inventory is P7.50 and the
estimated realizable value is P7.80.
The land is measured using the revaluation model, the fair value at the end of the year is
P1,250,000. The machinery and equipment is measured at cost. The fair value less cost of
disposal of machinery and equipment at year-end is P1,600,000.
The Investment in Associate pertains to a 30% ownership of Mousesack Corp. On January 15,
2020, it was determined that Mousesack Corp reported a profit of P320,000 for 2019 and
declared a dividend of P450,000 late in December, 2019 payable on February, 2020. No
adjustment was made for the investment in associate as of December 31, 2019.
The bonds pay 12% interest semi-annually on April 1 and October 1 and mature on April 1, 2022.
No interest has been accrued on the bonds and the last amortization of premium was made on
October 1, 2019. The entity uses the straight line method of amortization.
The redeemable preference shares @ P250 par were issued during the year at par.
Forty thousand shares, P100 par, are authorized of which 24,000 shares were issued and
subscribed including 2,000 shares in the treasury.
On December 1, 2019, Ciri Company declared a P10 cash dividend and 25% share dividend
payable on March 31, 2020.
The retained earnings appropriated balance of P240,000 was created in anticipation for the
result of a pending lawsuit. After the reporting period and before the financial statements were
issued, the suit was amicably settled and the entity paid P180,000.
On January 16, 2020, a customer owing P220,000 to Ciri Company filed for bankruptcy. The
allowance includes P80,000 pertaining to this customer.
REQUIRED:
1. Prepare the necessary adjusting entries including reclassification adjustments.
2. Compute the correct amount of retained earnings.
3. Prepare a properly classified statement of financial position with notes.