1 ACC417/ACP

1ST SEM/2021 – 2022

UL College of Accountancy
UNIVERSITY OF LUZON ACC417/ACP: CASE STUDY no. 1
COLLEGE OF ACCOUNTANCY
Dagupan City

INSTRUCTIONS: THIS IS A GROUP

WORK. SUBMIT YOUR OUTPUT NO
LATER THAN 12:00 PM SEPTEMBER 11,
2021. PREPARE YOUR OUTPUT IN
GOOD FORM USING MS EXCEL AS
SOLUTION SHEET.
2 PROBLEM 1: STATEMENT OF
FINANCIAL POSITION
UL College of Accountancy
ACC417/ACP: CASE STUDY no. 1

Your client, Lance Livestrong, is preparing for a meeting

with investors. He would like to provide appropriate
information about his company’s financial position.
Lance has provided the following accounts and balances
at December 31, 2019, for Lance Livestrong Company.

Debit Credit
Cash P50,000
Accounts receivable (net) 38,500
Inventories 65,300
Equipment (net) 104,000
 Patents 20,000
Notes and accounts payable P52,000
Non-current liabilities 100,000 Equity
125,800 P277,800 P277,800

Except for the following items, all adjustments have been

recorded in the accounts.

1. Cash includes P200 petty cash and P20,000 in a fund

designated for plant expansion in 2022.
2. The net accounts receivable is comprised of (a)
accounts receivable P52,000 and (b) allowance
for doubtful accounts P13,500.
3. Equipment had a cost of P132,000 and accumulated
depreciation of P28,000. 4. Notes and Accounts Payable
is comprised of the following : Accounts Payable
P32,000; Taxes Payable P3,000; and Note Payable
P17,000, due June 30, 2020.
5. Non-current liabilities are 10-year bonds paying
interest at 9%, and maturing June 30, 2027.
6. Equity is comprised of Share Capital – Ordinary (P1
par) P50,000; Share Capital – Premium P55,000;
and Retained Earnings P20,800.

Requirements:

1. Prepare a corrected classified statement of financial

position for Lance Livestrong Company at
December 31, 2019.

2. Livestrong is proud of his reporting and disclosure

practices. He provides the three primary
financial statements along with a president’s
letter describing the company’s
accomplishments for the past year. He is
wondering whether there are specific guidelines
for presenting current and non-current assets
and liabilities, as well as the prescribed order
and format for presenting items in the statement
of financial position. Advise Livestrong about
these issues.
UL College of Accountancy
3
ACC417/ACP: CASE STUDY no. 1
PROBLEM 2: STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME

ACC CO. Group (parent and its 75 per cent owned

subsidiary) presents the consolidated statement of profit
or loss and other comprehensive income following the
single-statement approach.

ACC CO. Group

Statement of comprehensive income at 31 December 2019
2019
Revenue 20,000 (a) Cost of sales (7,000) (b)
Distribution costs (1,000) (c) Administrative
expenses (4,000) (d) Other expenses (2,500) (e)
Extraordinary item (500) (f) Finance costs (1,000)
(g) Profit before tax 4,000
Income tax expense (1,600) (h) Dividend declared
and paid (400) (i) COMPREHENSIVE INCOME
FOR THE YEAR 2,000

Notes that do not form part of the statement of

comprehensive income prepared by the group’s
management.
Parent

Continui Discontin Su
ng ued y
Operati Operation
on

(a Increase in fair value of 3,000

) investment property

Sale of goods 10,000 1,500 5,

Gain on disposal of 500

discontinued operation

Revenue 13,500 1,500 5,

(b Cost of sales 4,000 1,000 2,

)

(c) Distribution costs 100 500 40

(d Administrative expenses 2,000 1,000 1,

)

(e) Advertising costs 1,000

Actuarial losses on defined 700 80

benefit plans
 Other expenses 1,700 80

(f) Impairment of a sales office equipment 500

(g Finance costs 500 50

)

(h All items of income and expense are

) subject to tax (deferred and current)
at

UL College of Accountancy
4
ACC417/ACP: CASE STUDY no. 1
40 per cent of the amount of
the income or expense.

(i) Dividend declared and paid 400

The parent raised 1,000 from the owners of the parent

during 2019 by issuing shares to the owners of the
parent.

The group follows an accounting policy of recognizing

actuarial gains and losses on its defined benefit
obligations in other comprehensive income.

Requirements:
1. Prepare ACC CO. Group’s financial performance
statements for the year ended 31 December 2019
using the single-statement approach. Ignore
comparative figures.

2. Prepare ACC CO. Group’s financial performance

statements for the year ended 31 December 2019
using the two-statement approach. Ignore comparative
figures.
5 PROBLEM 3: STATEMENT OF
CASH FLOWS
UL College of Accountancy
ACC417/ACP: CASE STUDY no. 1

Selected financial statement information and

additional data for Stanislaus Co. is presented
below.
December 31
2018 2019
Land P 58,800 P 21,000
Equipment ..................................................
............. 504,000 789,600
Inventory......................................................
............ 168,000 201,600 Accounts
receivable (net)..................................
84,000 151,200
Cash ...............................................................
............. 42,000 63,000
TOTAL........................................................P
856,800 P1,226,400

Share capital–
ordinary.......................................P420,00
0 P 487,200 Retained
earnings.................................................
67,200 205,800 Notes payable -
Long-term................................ 168,000
302,400 Notes payable - Short-
term............................... 67,200 29,400
Accounts
payable ..................................................
50,400 86,000 Accumulated
depreciation................................ 84,000
115,600
TOTAL........................................................P
856,800 P1,226,400

Additional data for 2019:

1. Net income was P235,200.
2. Depreciation was P31,600.
3. Land was sold at its original cost.
4. Dividends of P96,600 were paid.
5. Equipment was purchased for P84,000 cash.
6. A long-term note for P201,600 was
used to pay for an equipment purchase.
7. Share capital–ordinary was issued to
pay a P67,200 long-term note payable.

Requirement: Prepare a statement of cash flows for the year

ending December 31, 2019
6 PROBLEM 4: STATEMENT OF
CHANGES IN EQUITY
UL College of Accountancy
ACC417/ACP: CASE STUDY no. 1
Since the formation of ARENN CO. many years ago it has
been a wholly owned subsidiary of ACC CO..

In 2019, after the ACC CO. group’s consolidated financial

statements for the year ended 31 December 2018 had
been approved for issue, management discovered an
error in its prior period financial statements. The effect
of the error is P230,000 overstatement of retained
earnings at 1 January 2018. The error related to an error
in the calculation of depreciation of ACC CO.’s sales
building.

The equity of ACC CO. (separate entity) and ARENN CO.

(separate entity) before correcting the prior period
error is summarised as follows:
2018 2019

ACC CO. ARENN ACC C

CO.

Total equity at the beginning of the year:

- share capital 2,500,000 10,000 2,500,

- share premium 1,900,000 1,900

- retained earnings 2,070,000 80,000 2,415

Profit for the year 500,000 32,000 658,3

Actuarial gains/(losses) on defined (1,900) (5,000) (3,000

benefit pension obligation, net of tax

Exchange gains/(losses) on translation 67,000 (46,20

of foreign operation, net of tax

Issue of shares 6,000

Dividends declared and paid (220,000) (25,000) (320,0

Total equity at the end of the year 6,815,100 92,000 13,10

In 2019, ACC CO. issued 1,000,000 ordinary shares with a par

value of P1 each for P6 each.

Requirement: Prepare ACC CO. Group’s consolidated

statement of changes in equity for the year ended 31
December 2019.