Problem 4

Mirr 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?

ANSWER:
Accounting Equation (Assets=Liabilities + Equity) 2,000,000
7,500,000
Liabilities 1,500,000
Share Capital
0
Retained Earnings (*1,800,000-300,000)
TOTAL LIABILITIES & SHAREHOLDER’S EQUITY

Therefore: Total Assets = 11,000,000

(*) Sales Revenue 8,200,000

Operating Expense (6,400,000)

Net Income 1,800,000

Problem 5

Arabian 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?