CHAPTER 1

STATEMENT OF FINANCIAL POSITION

Basic problems

Problem 1-1

Darwin 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 operations to be sold beyond 12 months
Amounting to P700, 000 1,000,000
Financial asset held for trading 300,000
Equity in 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?

a. 6,000,000
b. 4,000,000
c. 6,800,000
d. 4,800,000
Problem 1-2

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

Cash 5,000,000
Accounts 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 expense, 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?

a. 6,750,000
b. 6,700,000
c. 7,700,000
d. 7,750,000

Problem 1-3

Rice 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 that
increased to P1, 800,000.

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

a. 6,500,000
b. 9,300,000
c. 8,800,000
d. 6,800,000
Problem 1-4

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

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 increase to P2, 000,000 by December 31, 2019.

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

a. 11,000,000
b. 11,300,000
c. 10,100,000
d. 12,100,000

Problem 1-5

Arabian Company reported the following current asset at year-end:

Cash 4,500,000
Accounts 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 account receivable 5,000,000

Allowance for doubtful accounts (500,000)
Claim against shipper for goods lost in transit 400,000
Selling price of Arabian Company’s unsold good 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?

a. 17,400,000
b. 17,000,000
c. 18,400,000
d. 15,400,000
Problem 1-6

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

Cash 3,500,000
Accounts receivable 3,000,000
Inventory 2,800,000
Prepaid insurance 200,000
Total accounts receivable 9,500,000

The accounts receivable considered of the following:

Customer account 1,400,000

Employees account collectible 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?

a. 8,000,000
b. 9,500,000
c. 8,500,000
d. 9,000,000

Problem 1-7

Ivan 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 post-dated 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 asset?

a. 7,700,000
b. 7,450,000
c. 7,400,000
d. 7,500,000
Problem 1-8

Gar Company report 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?

a. 7,100,000
b. 6,700,000
c. 6,500,000
d. 6,900,000

Problem 1-9

Brite 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
Contingent 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 lawsuits 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?

a. 10, 350,000
b. 10,150,000
c. 10,400,000
d. 10,950,000
Problem 1--10

Burma 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 account 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?

a. 6,700,000
b. 6,600,000
c. 7,100,000
d. 7,700,000
CHAPTER 2

STATEMENT OF FINANCIAL POSITION

Comprehensive problems

Problem 2-1

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 customers’ accounts 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 the debit

Balances of P1, 000,000 7,000,000
Notes payable 4,000,000
Bonds payable due June 31, 2020 3,000,000
Accrued expenses 2,000,000
Total current liabilities 16,000,000

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

a.19,040,000
b. 20,040,000
c. 20,050,000
d. 24,040,000

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

a. 19,000,000
b. 16,000,000
c. 15,500,000
d. 15,000,000
Problem 2-2

Gold 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 16, 2020.

Land held for sale was sold for cash on January 31, 2020.

What total amount should be reported as current assets?

a. 2,250,000
b. 2, 050,000
c. 1,950,000
d. 1,250,000

Problem 2-3

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

Cash 1,250,000
Accounts receivable 1,650,000
Prepaid taxes 500,000
Accounts payable 200,000
Share capital 1,000,000
Share premium 500,000
Retained earnings – beginning 1,500,000
Foreign currency translation adjustments 800,000
Revenue 4,000,000
Expenses 3,000,000
 7,200,000 7,200,000
During the current year, estimated tax payments of P500,000 were changed to prepaid taxes. The entity
has not yet recorded income tax expenses.

There was no difference between financial and taxable income. The tax rate is 30%.

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

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

a. 2,850,000
b. 2,650,000
c. 2,900,000
d. 3,100,000

Problem 2-4

Mint Company provided the following account balances at year-end which had been adjusted except for
income expense:

Cash 600,000
Accounts receivable 3,500,000
Cost in excess of billings on long-term contracts 1,600,000
Billing 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
Cost and expenses 5,180,000

All receivables 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 expenses. The tax rate is 30%.

1. Total retained earnings?

a. 1,950,000
b. 2,110,000
c. 2,400,000
d. 2,560,000

Problem 2-5

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) 10,500,000
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 expenses. The income
tax rate is 30%.

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

1. Total current assets?

a. 3,400,000
b. 4,400,000
c. 5,400,000
d. 4,900,000

2. total current liabilities

a. 2,700,000
b. 3,300,000
c. 4,050,000
d. 3,450,000
Problem 2-6

Cara Company provided the following information for the current year:

January 1 December 31
Current assets 700,000 ?
Property, plant and equipment 3,000,000 4,000,000
Current liabilities ? 300,000
Noncurrent liabilities 1,000,000 ?

Working capital of P600, 000 remained unchanged

Net income for the current year was P400, 000

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

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

a. 900,000
b. 300,000
c. 600,000
d. 450,000

2. what is the shareholders’ equity on December 31?

a. 3,000,000
b. 2,600,000
c. 2,700,000
d. 3,700,000

3. What is the amount of noncurrent liabilities on December 31?

a. 2,200,000
b. 1,100,000
c. 1,600,000
d. 1,900,000