MOCKBOARD EXAMINATION - May 2020

PRACTICAL FINANCIAL ACCOUNTING 1

Instruction : Answer the following questions, and provide your solutions in a separate clean
sheet of paper.

Problem 1

ABC Company provided the following information at year-end:

Cash 1,500,000
Accounts receivable 1,200,000
Inventory, including inventory expected in the ordinary
Course of operation to be sold beyond 12 months
Amounting to P700,000 1,000,000
Financial asset held for trading 300,000
Equity investment at fair value through other
Comprehensive income 800,000
Equipment held for sale 2,000,000
Deferred tax asset 150,000

What amount should be reported as total current assets at year-end?

Problem 2

CLJ company reported the following current assets at year-end:

Cash 5,000,000
Account receivable 2,000,000
Inventory, including goods received on
consignment P200,000 800,000
Bond investment at fair value through other
Comprehensive income 1,000,000
Prepaid expenses, including a deposit of P50,000 made
On inventory to be delivered in 18 months 150,000
Total current assets 8,950,000

Cash in general checking account 3,500,000

Cash fund to retire 5-year bonds payable 1,000,000
Cash held to pay value added taxes 500,000
Total cash 5,000,000

What total amount of current assets should be reported at year-end?

Problem 3

Bugas Company was incorporated on January 1, 2019 with P5,000,000 from the issuance of
share capital and borrowed 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 dividend. On December 31, 2019, the
liabilities had increased to P1,800,000

On December 31, 2019, what amount should be reported as total assets?

Problem 4

Salamin Company was incorporated on January 1, 2019 with proceeds from the issuance of
P7,500,000 in share capital and borrowed funds of P1,100,000.

During the first year, revenue from sales and consulting amounted to P8,200,000 , and operating
costs and expenses totaled P6,400,000.
On December 15, 2019, the entity declared a P300,000 dividend, payable to shareholders on
January 15, 2020. The liabilities increased to P2,000,000 by December 31, 2019.

On December 31, 2019, what amount should be reported as total assets?

Problem 5

Arabs Company reported the following current assets at year-end:

Cash 4,500,000
Account receivable 7,900,000
Notes receivable, net of discounted note P500,000 2,000,000
Inventory 4,000,000
Deferred charges 1,000,000
19,400,000
Accounts receivable comprised the following:

Trade accounts receivable 5,000,000

Allowance for doubtful accounts ( 500,000)
Claim against shipper for goods lost in transit 400,000
Selling prices of Arabian company’s unsold goods sent
to Tar Company on consignment at 150% of cost
and excluded from Arabian’s ending inventory 3,000,000

7,900,000

What amount should be reported as total current assets at year-end?

Problem 6

West Company reported the following current assets at year end:

Cash 3,500,000
Account receivable 3,000,000
Inventory 2,800,000
Prepaid insurance 200,000
Total current assets 9,500,000

The account receivable consisted of the following:

Customers’ account 1,400,000

Employees’ account collectable currently 200,000
Advances to subsidiary 500,000
Allowance for doubtful accounts ( 100,000)
Subscription receivable, not collectible currently 1,000,000
Total accounts receivable 3,000,000

What total amount should be reported as current assets at year-end?

Problem 7

Baans Company showed the following current assets at year-end:

Cash 3,200,000
Accounts receivable 2,500,000
Inventory 2,000,000
Total current assets 7,700,000

Cash on hand, including customer postdated check

P100,000 and employee IOU P50,000 500,000
Cash in bank per bank statement (outstanding check
 At year-end P200,000) 2,700,000
Total cash 3,200,000

What total amount should be reported as current assets?

Problem 8

Gardo Company reported the following liability account balances on December 31, 2019:

Accounts payable 1,900,000

Bonds payable, due December 31, 2020 3,400,000
Discount on bonds payable 200,000
Deferred tax liability 400,000
Dividends payable 500,000
Income tax payable 900,000
Note payable, due January 31,2021 600,000

On December 31, 2019, what total amount should be reported as

current liabilities?

Problem 9

Bugo Company provided the following information on December 31,2019:

Accounts payable 550,000

Note payable, 8% unsecured, due July 1, 2020 4,000,000
Accrued expenses 350,000
Contingency liability 450,000
Deferred tax liability 250,000
Bonds payable, 7%, due March 31, 2020 5,000,000
Premium on bonds payable 500,000

The contingent liability is an accrual for possible loss on a P1,000,000

Lawsuit filed against the entity.

The legal counsel expects the suit to be settled in 2020 and has estimated
that the entity will be liable for damages in the range of
P450,000 to P750,000.

The deferred tax liability is not related to an asset for financial reporting
and is expected to reverse in 2020.

What total amount should be reported as current liabilities on December 31, 2019?

Problem 10

Bruma Company disclosed the following information:

Accounts payable, after deducting debit balances in

suppliers’ accounts amounting to P100,000 4,000,000
Accrued expenses 1,500,000
Credit balances of customers’ accounts 500,000
Share dividend payable 1,000,000
Claims for increase in wages and allowance by employees
of the entity, covered in a pending lawsuit 400,000
Estimated expenses in redeeming prize coupons 600,000

What amount should be reported as total current liabilities?

Problem 11

Mazdali Company reported the following liability balances on

December 31, 2019:

10% note payable issued on October 1, 2018 maturing

October 1, 2020 2,000,000
12% note payable issued on March 1, 2018, maturing on March 1, 2020. 4,000,000

The 2019 financial statements were issued on March 31, 2020.

Under the loan agreement, the entity has the discretion to refinance
the 10% note payable for a least twelve months after December 31, 2019.

On March 1, 2020, the entire P4,000,000 balance of the 12% note

payable was refinances through issuance of a long-term obligation
payable lump sum.

What amount of the notes payable should be classified as current on

December 31, 2019?

Problem 12

William Company reported the following liabilities on December 31, 2019:

Account payable 2,000,000

Short-term borrowings 1,500,000
Bonds payable due December 31, 2021 3,000,000
Premium on bonds payable 500,000
Mortgage payable, current portion P500,000 3,500,000
Bank loan, due June 30, 2020 1,000,000

The P1,000,000 bank loan was portion was refinanced with a 5-year
loan on December 31, 2019. The financed were issued March 1, 2020.

What total amount should be reported as current liabilities on December 31, 2019?

Problem 13

Ron Company provided the following information on December 31,2019:

Accounts payable, net of creditors’ debit balances P200, 000 2,000,000

Accrued expenses 800,000
Bonds payable due December 31, 2021 4,500,000
Premium on bonds payable 500,000
Deferred tax liability 500,000
Income tax payable 1,100,000
Cash dividend payable 600,000
Share dividend payable 400,000
Note payable- 6%, due March 1, 2020 1,500,000
Note payable-8%, due October 1, 2020 1,000,000

The financial statements for 2019 were issued on March 31, 2020.

On December 31, 2019, the 6% note payable was refinanced on a

long-term basis.

Under the loan agreement, the entity has the discretion to refinance the
8% note payable for at least twelve months after December 31, 2019

1) What amount should be reported as total current liabilities?

2) What amount should be reported as total noncurrent liabilities?
Problem 14

Manchester Company provided the following information on December 31, 2019:

Employee income taxes withheld 900,000

Cash balance at First State Bank 2,500,000
Cash overdraft at Harbor Bank 1,300,000
Accounts receivable with credit balance 750,000
Estimated expenses of meeting warranties 500,000
Estimated damages as a result of unsatisfactory performance
on a contract 1,500,000
Accounts payable 3,000,000
Deferred serial bonds, issued at par and bearing interest at 12%,
payable in semiannual installments of P500,000 due April 1
and October 1, of each year, the last bond to be paid on
October 1, 2025. Interest is also paid semiannually. 5,000,000

What amount should be reported as total current liabilities on December 31, 2019?

Problem 15

Jake Company provided the following information on December 31, 2019:

 Accounts payable amounted to P500,000 and accrued expenses totaled

P300,000 on December 31, 2019.
 On December 15, 2019, the entity declared a cash dividend of P7 per
share on 100,000 outstanding shares, payable on January 15, 2020.
 On July 1, 2019, the entity issued P5,000,000, 8% bonds for P4,400,000
to yield 10%. The bonds mature on June 30, 2024, and pay interest
annually every June 30.
 The pretax finance income was P8,500,000 and taxable income was
P6,000,000. The difference is due to P1,000,000 permanent difference
and P 1,500,000 of taxable temporary difference to reverse in 2020.
The income tax rate is 30%. The entity made estimated income tax
payments during at the year of P1,000,000.

What amount should be reported as total current liabilities on December 31, 2019?

Problem 16

UZ Company provided the following current assets and shareholders’ equity at year-end:

Cash 600,000
Financial assets at fair value through profit or loss, including
Cost of P300,000 of United Company shares 1,000,000
Accounts receivable 3,500,000
Inventory 1,500,000
Total current assets 6,600,000

Share capital 5,000,000

Share premium 2,000,000
Retained earning 500,000
Total shareholders’ equity 7,500,000

What amount should be reported as total shareholders’ equity?

Problem 17

Kalinga Company provided the following information at year-end:

Share capital 15,000,000

Share premium 5,000,000
Treasury shares, at cost 2,000,000
Actuarial loss on defined benefit plan 1,000,000
Retained earnings unappropriated 6,000,000
Retained earnings appropriated 3,000,000
Revaluation surplus 4,000,000
Cumulative translation adjustment- credit 1,500,000

What amount should be reported as total shareholders’ equity?

Problem 18

Gold Company provided the following at year-end:

Share premium 1,000,000

Accounts payable 1,100,000
Preference share capital, at par 2,000,000
Ordinary share capital, at par 3,000,000
Sales 10,000,000
Total expenses 7,800,000
Treasury shares at cost- ordinary 500,000
Dividends 700,000
Retained earnings- beginning 1,000,000

What amount should be reported as total shareholders’ equity at year-end?

Problem 19

Montery Company reported net assets totaling P8,750,000 at year-end which included the
following:

Treasury shares of Mont Company at cost 250,000

Idle machinery 100,000
Trademark 150,000
Allowance for inventory write down 200,000

What amount should be reported as net assets at year-end?

Problem 20

Duda Company provided the following information at year-end:

Cash and cash equivalents 500,000

Accounts receivable, net of allowance P100,000 2,000,000
Inventory 6,000,000
Property, plant, and equipment at carrying amount 12,000,000
Accounts payable 4,400,000
Wages payable 1,500,000
Share capital 6,000,000
Share premium 4,000,000

The only asset not listed is short-term investment.

The only liabilities not listed are a P3,000,000 note payable due in
two years and related accrued interest of P100,000 due in four months.

The current ratio at year-end is 1.5 to 1.00.

1. What is the amount of current liabilities?
2. What is the amount of short-term investment?
3. What is the balance of retained earnings at year-end?

Problem 21

Kenya Company provided the following information on December 31, 2019:

Cash in bank, net of bank overdraft P500,000 5,000,000

Petty cash, unreplenished petty cash expenses P10,000 50,000
Notes receivable 4,000,000
Accounts receivable, net of customer’s with
credit balances P1, 500,000 6,000,000
Inventory 3,000,000
Bond sinking fund 3,000,000
Total current assets 21,050,000

Accounts payable, net of suppliers’ accounts with debit

balances of P1,000,000 7,000,000
Notes payable 4,000,000
Bond payable due June 30, 2020 3,000,000
Accrued expenses 2,000,000

Total current liabilities 16,000,000

1. What amount should be reported as total current assets on December 31, 2019?
2. What amount should be reported as total current liabilities on December 31, 2019?

Problem 22

Golden Company provided the following trial balance on December 31, 2019:

Cash overdraft 100,000

Accounts receivable 350,000
Inventory 600,000
Prepaid expenses 100,000
Land held for sale 1,000,000
Property, plant and equipment 950,000
Accounts payable 200,000
Accrued expenses 150,000
Ordinary share capital 1,500,000
Share premium 250,000
Retained earnings ________ 800,000
3,000,000 3,000,000

Checks amounting to P300,000 were written to vendors and recorded on December 29, 2019
resulting in a cash overdraft of P100,000. The checks were mailed on January 15, 2020.

1. What total amount should be reported as current assets?

2. What total amount should be reported as current liabilities?
3. What is the total shareholders’ equity?
Problem 23

Four Company provided the following trial balance at year-end which had been adjusted except
for income tax expense:

Cash 1,250,000
Account receivable 1,650,000
Prepaid taxes 500,000
Accounts payable 200,000
Share capital 1,000,000
Share premium 500,000
Retained earnings-beginning
Foreign currency translation adjustment 1,500,000
Revenue 800,000
Expenses 4,000,000
3,000,000

7,200,000 7,200,000

During the current year, estimated tax payments of P500,000 were charged to prepaid taxes.
The entity has not yet recorded income tax expense.

There were no differences between financial and taxable income. The tax rate is 30%

Included in accounts receivable is P500,000 due from a customer. Special terms granted
to this customer require payment in equal semiannual installments of P125,000 every
April 1 and October 1.

1. What amount should be reported as total current assets at year-end?

2. What amount should be reported as retained earnings at year-end?

Problem 24

Sweet Company provided the following account balance at year-end which had been adjusted
excepted for income tax expense:

Cash 600,000
Accounts receivable 3,500,000
Cost in excess of billings on long-term contracts 1,600,000
Billings in excess of cost on long-term contracts 700,000
Prepaid taxes 450,000
Property, plant, and equipment, at carrying amount 1,510,000
Note payable – noncurrent 1,620,000
Share capital 750,000
Share premium 2,030,000
Retained earnings unappropriated 900,000
Retained earnings restricted for note payable 160,000
Earnings from long-term contracts 6,680,000
Costs and expenses 5,180,000

All receivable on long-term contracts are considered to be collectible within 12 Months.

During the year, estimated tax payments of P450,000 were charged to prepaid taxes.
The entity has not recorded income tax expense. The tax rate is 30%.
At year-end, what amount should be reported as

1. Total retained earnings?

2. Total noncurrent liabilities?
3. Total current assets?
4. Total shareholders’ equity?
Problem 25

Shaw Company provided the following trial balance on December 31, 2019 which
had been adjusted except for income tax expense:

Cash 600,000
Accounts receivable 2,800,000
Inventory 2,000,000
Property, plant and equipment (net) 10,000,000
Accounts payable and accrued liabilities 1,800,000
Income tax payable 1,500,000
Deferred tax liability 700,000
Share capital 2,500,000
Share premium 3,000,000
Retained earnings, January 1 3,500,000
Net sales and other revenue 15,000,000
Costs and expenses 10,000,000
Income tax expense 2,000,000 ________
28,000,000 28,000,000

The accounts receivable included P1,000,000 due from a customer and payable in
quarterly installments of P125,000. The last payment is due December 30, 2021.

During the year, estimated tax payment of P600,000 was charged to income
tax expense. The income tax rate is 30%

On December 31, 2019, what amount should be reported as

1. Total current assets?

2. Total current liabilities?
3. Retained earnings?

Problem 26

Cara Company provided the following information for the current year:

Current assets
Property, plant, and equipment
Current liabilities
Noncurrent liabilities

Working capital of P600,000 remained unchanged.

Net income for the current year was P400,000.

No dividends were declared during the year and there were no other changes in shareholders’
equity.

1. What is the amount of current assets on December 31?

2. What is the shareholders’ equity on December 31?
3. What is the amount of noncurrent liabilities on December 31?

Problem 27

Dean Company acquired 100% of Morey Company in the prior year. During the current year, the
individual entities included in their financial statements the following:
Dean Morey
Key officers’ salaries 750,000 500,000
Officers’ expenses 200,000 100,000
Loans to officers 1,250,000 500,000
Intercompany sales 1,500,000
What total amount should be reported as related party disclosures in the
notes to Dean Company’s consolidated financial statements for the current year?

Problem 28

During the current year, Jane Company engaged in the following transactions:

Key management personnel compensation 2,000,000

Sales to affiliated entities 3,000,000

What total amount should be included as related party disclosures in

Jane Company’s separate financial statements for the current year?

Problem 29

The audit of Anne Company for the year ended December 31, 2019 was
completed on March 1, 2020

The financial statements were signed by the managing director on March 15, 2020
and approved by the shareholders on March 31, 2020.

* On January 15, 2020, a customer owing P900,000 to Anne Company filed

for bankruptcy.
The financial statements included an allowance for doubtful accounts pertaining
to this customer of P100,000
* Anne Company’s issued share capital comprised 100,000 ordinary shares
with P100 par value.
The entity issued additional 25,000 shares on March 1, 2020 at par value.
* Equipment with carrying amount of P525,000 was destroyed by fire on
December 15, 2019.
Anne Company had booked a receivable of P400,000 from the insurance
entity on December 31, 2019.
After the insurance entity completed an investigation on February 1, 2020, it was discovered
that the fire took place due to negligence of the machine operator. As a result, the
insurer’s liability was zero on this claim.

What total amount should be reported as “adjusting events” on December 31, 2019?

Problem 30

Brock Company reported operating expenses in two categories, namely distribution and general
and administrative.

The adjustment trail balance at year-end included the following expenses and loss accounts for
current year:

Accounting and legal fees 1,200,000

Advertising 1,500,000
Freight out 800,000
Interest 700,000
Loss on sales of long-term investment 300,000
Officers’ salaries 2,250,000
Rent for office space 2,200,000
Sales salaries and commissions 1,400,000

One-half of the rented premises is occupied by the sales department.

What amount should be reported as total distribution costs?

end