SET A. INSTRUCTIONS: Read each situation carefully and completely.

Provide the answers on An examination of the Receivables revealed the following:

the Answer Sheet: (1) respective balances and (2) journal entries. Trade accounts, net of customer’s account with credit balance of 50,000 1,432,000
#1-6. Joy Division Corp reported the following current assets at December 31, 2018: Allowance for doubtful accounts (280,000)
Cash and Cash Equivalent 15,156,000 Advances to suppliers 394,000
Receivables 4,826,000 Advances to Officers, not currently collectible 750,000
Inventory 6,415,000 Advances to affiliated entities 650,000
TOTAL CURRENT ASSETS 26,397,000 Subscription Receivables – not currently collectible 510,000
Information with respect to the cash and cash equivalents on December 31, 2018. Claim against shipper for goods lost in transit other rec
Cash in Bank 850,000
Checking account @ Primary Bank- #01 (100,000) Selling price of unsold goods sent out on consignment at 130% of cost inv /130
Checking account @ Primary Bank - #02 2,500,000 520,000
Time Deposit @ Primary Bank for plant expansion LRT INV 1,200,000 Total Receivables 4,826,000
Foreign Bank Account-unrestricted Cash 2,000,000
Payroll account @ Secondary Bank cash 700,000 Inventory data at year end:
Time Deposit @ Secondary Bank, matures June 30, 2019, Items counted in the bodega 2,465,000
acquired September 30, 2016 ST INV 500,000 Items in receiving department, refused by us because of damage 460,000
Cash on Hand Items on counter for sale at selling price (20% Profit on sales) 560,000
Currency and coins 155,000 Items not included in the count specifically segregated per sales contract
Value added tax fund 284,000 already paid by the customer 600,000
Sinking Fund Cash 1,200,000 Items in transit, purchased FOB Shipping Point, invoice not yet received 480,000
Travellers check CASH 440,000 Items ordered, invoice received but goods not received. Freight is paid by seller 400,000
Customer’s Not-sufficient-fund check Add to ar 125,000 Items shipped today, invoice mailed, FOB shipping point. 800,000
Cash Surrender Value 150,000 Items in transit, sold FOB Destination at cost (20% Profit on sales)
Long-Term Refundable Deposit 100,000 no invoice made as of year end 650,000
Postage stamps 22,000 Total Inventory 6,415,000
IOUs from employees other receivables Items in the bodega included in the count,
330,000 Damaged and unsalable 350,000
Cash Equivalents For administrative use 250,000
Call Option other rtece 100,000 On consignment at selling price included in the count
Money Market Instrument cash eq 180,000 at cost (40% profit on sales) 700,000
Money Orders cash 450,000 1. What amount should be reported as cash at year end?
Treasury Bills, matures Feb 1, 2019, acquired Oct 1, 2018 st inv 520,000 2. What amount should be reported as net accounts receivable at year end?
Treasury Shares @ cost SHE Dedu 1,000,000
Investment in Shares @ Fair Value through profit or loss st inv 600,000 3. What total amount should be reported on the additional line items in the current assets
Investment in Shares @ Cost lt inv 500,000 section as Short-Term Investments and Prepaid Expenses? 1,892,000
Investment in Bonds @ Amortized Cost lt in 2,200,000 4. What amount should be reported as inventory at year end? 3423000
Call Option 100,000
5. What total amount should be included in the line item long-term investments? 5.9m
6. What total amount should be reported as current assets at year-end?
SET A Page 1 of 11
 EVENTS AFTER THE REPORTING PERIOD (average) RELATED PARTY DISCLOSURES (EASY)
7. The end of the reporting period of Norway Company is December 31, 2017 and the 8. Gibson Company reported that remuneration and other payments made to the entity’s
financial statements for 2017 are authorized for issue on March 15, 2018. chief executive officer during the current year were:
a. On December 31, 2017, Norway Co had a receivable of P300,000 from a customer Annual Salary 2,000,000
that is due 60 days after the end of the reporting period. On January 15, 2018, a Reimbursement of travel expenses for business trips 1,200,000
receiver was appointed for the said customer. The receiver informed Norway Contributions to retirement plan 500,000
that the P300,000 would be paid in full by June 30, 2018. Share Options and other share-based payments 1,000,000
What total amount should be disclosed as “compensation” to key management
b. Norway Company had reported a P250,000 contingent liability on December 31, personnel? 3.5M
2017 related to a court case in which Norway was the defendant. The case was
not heard until the first week of February, 2018. On February 11, 2018, the judge
handed down a decision against Norway. The judge determined that Norway was STATEMENT OF COMPREHENSIVE INCOME
liable to pay damages and costs totalling P400,000. 9. Kay Company provided the following information for the current year:
Decrease in raw materials inventory 350,000
c. On December 31, 2017, Norway had a receivable from a large customer in the Increase in goods in process inventory 200,000
amount of P350,000. On January 31, 2018, Norway Company was advised in Increase in finished goods inventory 150,000
writing by the liquidator of the said customer that the customer was insolvent Raw materials purchased 4,300,000
and that only 10% of the receivable will be paid on April 30, 2018. No allowance Direct Labor payroll 2,000,000
was recognized for this account. Factory Overhead 3,000,000
Freight Out 250,000
d. On March 1, a dividend of P1,750,000 was declared and a contractual profit share Freight In 450,000
payment of P550,000 was made, both based on the profit for the year ended What is the cost of goods sold for the current year?
December 31, 2017.
Smiths Company reported that the financial records were destroyed by fire at the end of the
e. On November 1, 2017, Norway Company filed a suit against another entity current year. However, certain statistical data related to the income statement are available.
seeking damages of P800,000 for patent infringement. This amount was Interest Expense 25,000 Freight In 180,000
disclosed at the end of the year because no decision has been made at that time. Cost of Goods Sold 2,100,000 Freight Out 100,000
On February 10, 2018, the dependant settled this case by an amount of P700,000. The beginning inventory was P400,000 and decreased 20% during the year.
Administrative expenses are 25% of cost of goods sold but only 8% of gross sales.
f. On March 10, 2018, one of the entity’s factories with a carrying amount of Four-fifths of the operating expenses relate to sale activities.
P1,000,000 was completely razed by forest fire that erupted in the vicinity.
10. What is the amount of purchases during the year?
What net amount should be adjusted on net income for 2017? INCREASE (DECREASE) 11. What is the income before tax?
*Journal Entry #1 & 2 – events b & c

SET A Page 2 of 11
Simmons Corp reported net income of P2,560,000 for the current year. The entity owned
30% of Kellerman Corp’s share capital.
The auditor questioned the following amounts that had been included in income before tax: NONCURRENT ASSET HELD FOR SALE
Unrealized loss on financial asset at fair value through 15. On April 1, 2017, Brandy Company had a machine with a cost of P5,000,000 and
other comprehensive income ( 280,000) accumulated depreciation of P3,750,000. On this date, the machine was classified as
Loss from fire (1,200,000) held for sale and decided to sell the machine within one year.
Translation Gain on foreign operation 510,000 On April 1, 2017, the machine had an estimated selling price of P700,000 and a remaining
Equity in earnings of Kellerman Corp 940,000 useful life of two years. It is estimated that the selling cost associated with the disposal of
Gain from change in fair value attributable to market risk of the machine will be P50,000.
financial liability designated at FVPL 620,000 On December 31, 2017, the estimated selling price of the machine had increased to
Dividend received from Kellerman Corp 340,000 P850,000 with estimated selling cost of P100,000.
Acquisition of Kellerman Corp’s share capital at more than fair What amount of impairment loss should be recognized in 2017?
value of net assets attributable to goodwill ( 320,000) *JOURNAL ENTRY #3 – December 31, 2017
Gain on early retirement of bonds payable 470,000
Unrealized loss on forward contract designated as fair
value hedge ( 140,000) 16. Chump Company accounted for noncurrent assets using the revaluation model. On
Gain on retirement of preference shares 360,000 October 1, 2017, the entity classified a land as held for sale. The carrying amount of
Adjustment of profit of prior year for computation error the land was P5,000,000 and the balance in the revaluation surplus was P1,000,000.
in depreciation ( 850,000) At the same date, the fair value of the land was estimated at P5,500,000 and the cost of
12. What amount should be reported as income before tax for the current year? disposal is P100,000.
13. What net amount should be reported as other comprehensive income for the current On December 31, 2017, the fair value less cost of disposal of the land did not change. The
year? land was sold on January 31, 2018 for P5,800,000.
14. What amount should be reported as gain on disposal of land in 2018?
*JOURNAL ENTRY#4 – January 31, 2018 for the realization.
May chance na kasama to

17. Affable company purchased an equipment for P5,000,000 on January 1, 2017. The
equipment had a useful life of 5 years with no residual value.
On December 31, 2017, the entity classified the equipment as held for sale. On such date,
the fair value cost less of disposal of the equipment was P3,500,000.
On December 31, 2018, the entity believed that the criteria for classification as held for
sale can no longer be met. Accordingly, the entity decided not to sell the equipment but
to continue to use it. On this date, the fair value less cost of disposal of the equipment
was P2,700,000.
What is the adjusted carrying amount of the equipment of December 31, 2019?
SET A Page 3 of 11
 *JOURNAL ENTRY #5&6 – December 31, 2018

DISCONTINUED OPERATIONS CHANGE IN ACCOUNTING ESTIMATE

18. Zebra Company is a diversified with nationwide interests in different industries. Its Acute Company was incorporated on January 1, 2014. In preparing the financial
food distribution division was deemed to be inconsistent with the long-term direction statements for the year ended December 31, 2016, the entity used the following original
of the entity. On October 1, 2017, the board of directors voted to approve the cost, useful life and depreciation method for the property, plant and equipment:
disposal of the division. The sale is expected to occur in August, 2018. Original Cost Useful Life Method
The food distribution had revenue of P35,000,000 and expenses of P27,000,000 for the Building 15,800,000 10 years Straight Line
period January 1 to September 30 and revenue of P15,000,000 and expenses of Machinery 12,600,000 8 years Double Declining Bal.
P10,000,000 for the period October 1 to December 31. Furniture 4,200,000 6 years SYD
The carrying amount of the division’s net assets on December 31, 2017 was P56,000,000 On January 1, 2017, the entity determined that the remaining useful life is 5 years for the
and the fair value less cost of disposal was P58,000,000. The sale contract required Zebra building, 3 years for the machinery and 2 years for the furniture. The entity will also use the
to terminate certain employees incurring an expected termination cost of P4,000,000 to straight line method of depreciation beginning 2017.
be paid by June 15, 2018. The income tax rate is 30%. 20. What is the balance of the accumulated depreciation on December 31, 2016?
What amount should be reported as income from discontinued operation for 2017? 21. What is the depreciation expense during 2017?
*JOURNAL ENTRY #7 – To record depreciation on December 31, 2014

19. Dream Company has two divisions, East and West. Both qualify as business
components. In 2018, the entity decided to dispose of the assets and liabilities of 22. Nilsson Company began operations on January 1, 2015. On December 31, 2015 and
division East and its probable that the disposal will be completed early next year. The 2016, the entity provided for uncollectible accounts expense based on 1% of annual
revenue and expenses of Dream Company for 2017 and 2018 are as follows: credit sales.
2018 2017 During 2016, the entity changed the method of determining the allowance for
Sales-West 6, 000, 000 4, 600, 000 uncollectible accounts by applying a certain percentage to the balance of the accounts
Total nontax expense-West 2, 400, 000 4, 100, 000 receivable. This will be apply as part of the adjustments at the end of the year after the
Sales-East 3, 500, 000 5, 100, 000 current provision of 1% of annual credit sales.
Total nontax expense-East 3, 900, 000 4, 500, 000 The following information related to the years ended December 31, 2016 and 2015:
During the latter part of 2018, the entity disposed of a portion of division East and 2016 2015
recognized a pretax loss of P1, 000, 000 on the disposal. The income tax rate is 30%. Credit Sales 3,000,000 2,800,000
What amount of income should be reported by Dream Company in 2018? Collections, including recovery 2,915,000 2,400,000
Accounts written off 27,000 none
Recovery of accounts written off 7,000 none
If 8% of accounts receivable was used to determine the required allowance, what was the
doubtful accounts expense to be reported for 2016?
*JOURNAL ENTRY#8 – Dec 31, 2016 adjustment after determining the required allowance.

SET A Page 4 of 11
 *JOURNAL ENTRY#10 – Compound entry to initially adopt the revaluation model and the
related deferred tax liability on June 30, 2019.
CHANGE IN ACCOUNTING POLICY 25. What amount should be reported as the deferred tax liability on December 31, 2019?
23. On January 1, 2017, Flank Company changed from the average cost method to the INTERIM FINANCIAL REPORTING
FIFO method to account for inventory. The entity provided the following ending 26. Maurice Company provided the following information for the first quarter:
inventory for each method: 2016 2017 Loss from typhoon 600,000
Average cost 500,000 900,000 Insurance for the calendar year 300,000/4
FIFO cost 700,000 1,400,000 Loss on inventory writedown 100,000
The entity reported the following income statement line items using the average method: Property Taxes for the calendar year 500,000/4
2016 2017 Advertising of a new product 300,000
Sales 10,000,000 13,000,000 Depreciation Expense for the calendar year 600,000/4
Cost of Goods Sold 7,000,000 9,000,000 Year-End bonuses to employees 800,000/4
Operating Expenses 1,500,000 2,000,000 Ordinary Repairs to Equipment 200,000
The entity accrued tax expense on December 31 of each year and paid the tax in April of What total amount of expenses should be reported in the first quarter?
the following year. The income tax rate is 30%.
What amount of net income should be reported in 2017 after the change to the FIFO 27. Sigma Company has a financial reporting year ending September 30, 2019.
inventory method? Income before tax Effective Tax Rate
*JOURNAL ENTRY#9 – to apply the change in accounting policy. First Quarter 2,400,000 32%
Second Quarter 3,500,000 32%
#23-24. Kibbitz Company provided the following information on January 1, 2019 related Third Quarter 2,800,000 30%
to the land and building. Fourth Quarter 3,200,000 30%
Land 5,000,000 What is the total income tax expense for the year ended September 30, 2019?
Building 45,000,000
Accumulated depreciation – building 7,500,000 28. Hyperion Company provided the following income statement for the year ended
There were no additions or disposals during 2019. Depreciation is computed using December 31, 2018: SALES 6,000,000
straight over 15 years for building. On June 30, 2019, Kibbitz Company decided to initially  Third quarter sales were 30% of total sales. COST OF GOODS SOLD (2,800,000)
GROSS INCOME 3,200,000
adopt the policy to carry assets at revalued amount. On this date, the land and building  For interim reporting purposes, a gross
GAIN ON SALE OF EQPT 100,000
were revalued using the following information: profit rate of 40% can be justified. TOTAL INCOME 3,300,000
Replacement cost Sound value  Variable operating expenses are allocated OPERATING EXPENSES (500,000)
Land 6,500,000 6,500,000 in the same proportion as sales. Fixed CASUALTY LOSS (300,000)
Building 60,000,000 48,000,000 operating expenses are allocated based on INCOME BEFORE TAX 2,500,000
The income tax rate is 30%. The entity recognized a deferred tax liability on revaluation the expiration of time. INCOME TAX - 30% (750,000)
date. NET INCOME 1,750,000
 Of the total operating expenses, P400,000
24. What is the increase on retained earnings during 2019 for the adoption of the relate to variable expenses and P100,000 relate to fixed expenses.
revaluation model?  The casualty loss occurred on June 1, 2018.
 The equipment was sold on September 1, 2018.
SET A Page 5 of 11
 What amount should be reported as income before tax for the third quarter ended 9% Mortgage Payable 2,500,000
September 30, 2018? Accrued Benefit Cost 490,000
Shareholders’ Equity 4,370,000
OPERATING SEGMENT The cash on hand includes a petty cash fund P20,000. No replenishment was made at the end
29. Clay Company has three lines of business, each of which was determined to be of the year. The fund have expense vouchers of P4,000 and employee IOUs of P3,000.
reportable segment. The entity sales aggregated P7,500,000 in the current year, of The cash in bank composing of three accounts from the same bank.
which Segment No. 1 contributed 50%. Traceable costs were P2,250,000 for Segment  A checking account which resulted to an overdraft because of checks of P500,000
No. 1 out of a total of P5,000,000 for the entity as a whole. For external reporting, the written to vendors and recorded on December 29, 2019. These checks were mailed
entity allocated common costs of P1,500,000 based on the ratio of a segment’s on January 5, 2020.
income before common costs to the total income before common costs. In the  A current account use for current operations.
financial statements for the current year, what amount should be reported as profit  A time deposit account for P1,500,000 acquired during the year and will mature
for Segment No. 1? December 31, 2021.

Included in the accounts receivable is P500,000 due from a customer. Special terms granted
#29-30. Loraine Company reported revenue of P50,000,000, including intersegment sales of to this customer require payment in equal semi-annual instalments of P125,000 every April 1
P10,000,000 expenses of P37,000,000 and net income of P3,000,000 for the current year. and October 1.
Expenses included payroll cost of P15,000,000. The combined assets of all segments at year-
end totalled P45,000,000. The inventory included goods held on consignment amounting to P320,000 and goods in
30. What is the minimum amount of revenue to be disclosed by all reportable segments? transit purchased FOB shipping point for P120,000 and sold FOB shipping point P140,000.
31. What is the minimum amount of sales to be considered a major customer?
The prepaid expenses includes P100,000 discount on bonds payable, P50,000 cash surrender
STATEMENT OF FINANCIAL POSITION value for life insurance, P120,000 net remeasurement loss on defined benefit plan and
#31-38. NEW ORDER Corp provided the following information on December 31, 2019: P46,000 deferred tax asset .
Cash on hand, including a customer postdated check of P100,000 P 510,000
Cash in Bank, net of bank overdraft of P300,000 2,360,000 The property, plant and equipment includes a patent for P520,000 and land measured using
Accounts Receivable, net of customers’ account with credit the revaluation model with an original cost of P1,500,000 and revaluation surplus of P200,000
Balances of P200,000 and allowance of P80,000 1,720,000 which was classified as held for sale during the year. On the date of classification the fair
Inventory 1,630,000 value of the land was P1,800,000 and the cost of disposal was P100,000. At the end of the
Prepaid Expenses 580,000 year, the fair value of the land is P2,000,000 and the cost of disposal P150,000. No
Property, Plant and Equipment, net 4,200,000 adjustment were made to the revalued amount of land on the classification date until year-
Bond Sinking Fund 2,250,000 end.
Accounts Payable, net of supplier’s accounts with debit balances
Of P440,000 1,510,000 The bonds payable was issued on January 1, 2019 for P2,900,000 and matures annually every
Accrued Expenses 180,000 January 1 beginning January 1, 2020 for P1,000,000 plus annual interest. The nominal rate is
Bonds payable – 3,000 bonds @ P1,000 face amount 3,000,000 10% and the effective rate is 12%. Interest expense has not been recognized as of year-end.
10% Notes Payable, due October 1, 2020 1,200,000
SET A Page 6 of 11
The bond sinking fund is set aside for the annual payments of principal and interest of these
bonds.
Under the loan agreement for the 10% note payable, the entity has the discretion to refinance
the obligation for at least 12 months after December 31, 2019. Interest was paid on October
1, 2019. Interest has not been accrued as of year-end.
The mortgage note payable was issued March 1, 2018 with a term of five years. Terms of the
note give the holder the right to demand immediate payment if the entity fails to make a
monthly interest payment within ten days from the date the payment is due. On December
31, 2019, the entity is two months behind in making the required interest payments. Interest
is recorded when payment is made.
The shareholders’ equity includes 200,000 issued shares of P10 par value all issued at P14 per
share. During the year, acquisition of 38,000 own shares at P13 per share and reissued 12,000
of these shares for P15 per share. The remaining balances pertain to the revaluation surplus
recognized for land before reclassification and retained earnings.
NOTE: Determine the balance of the retained earnings – before adjustment. Apply
adjustments that affect nominal accounts directly on retained earnings. Ignore tax effect.
32. What amount must be presented for the line item trade and other receivables?
33. What is the amount of current assets to be reported on December 31, 2019?
34. What amount of interest expense should be recognized for 2019?
*JOURNAL ENTRY#11 – 1 Compound adjustment for interest at the end of the year.
35. What is the amount of current liabilities to be reported on December 31, 2019?
36. What is the amount of noncurrent assets to be reported on December 31, 2019?
37. What is the amount of noncurrent liabilities to be reported on December 31, 2019?
38. What is the adjusted balance of unappropriated retained earnings to be presented in
the face of the statement of financial position?
39. What total amount should be presented as component of reserves in the
shareholders’ equity section?
Events after the reporting period
Bane Company provided the following information before the 2020 financial statements
were issued:
On December 31, 2020, the company was a defendant in a pending lawsuit.
In the opinion of the entity’s attorney, it is probable that Bane Company will have to pay
P500,000 and it is reasonably possible that Bane Company will have to pay P600,000 as a
result of this lawsuit.
Bane Company is being sued for illness caused to local residents as a result of negligence
on the entity’s part in permitting the local residents to be exposed to highly toxic
chemicals from its plant. The entity’s lawyer stated that it is probable that the entity will
lose the suit and be found liable for a judgment costing the entity anywhere from
P1,200,000 to P6,000,000. However, the lawyer estimated that the most probable cost is
P3,600,000.
During 2020, Bane Company filed suit against West Company seeking damages for patent
infringement. On December 31, 2020, the legal counsel believed that it was probable that
Bane Company would be successful against West Company for an estimated amount of
P1,500,000. After the financial statements were issued, Bane Company was awarded
P1,000,000 and received full payment thereof.
On November 25, 2020, an explosion occurred at a plant causing extensive property
damage to area buildings. The management and counsel concluded that it is probable
that the entity would be responsible for the damages, and that P3,500,000 is a reasonable
estimate of liability. Bane’s P5,000,000 comprehensive public liability policy has a
P500,000 deductible clause.
40. What amount is the effect of the above information on 2020 net income? INCREASE
(DECREASE)
41. What total amount should be accrued in the 2020 financial statements?
42. What total amount of contingent liability should be disclosed in the financial
statements?
SET A Page 7 of 11
PRIOR PERIOD ERRORS
Extracts from the statement of financial position of Aenima Company showed the
STATEMENT OF COMPREHENSIVE INCOME
following:
Dec. 31, 2018 Dec. 31, 2017 #45-49. The line items of the statement Sales 9,250,000
Development Costs 8,610,000 5,480,000 of comprehensive income for the year Interest Revenue 128,000
Amortization (2,505,000) (1,644,000) ended December 31, 2019 from Odelay Remeasurement Gain on Defined Benefit Plan 120,000
The capital development costs relate to a single project that commenced in 2015. Revaluation Surplus during the year 400,000
Company in relation to its continuing
Share of profit of associate 280,000
It has now been discovered that one of the criteria for capitalization has never been met. operations:
Cost of goods sold 6,100,000
43. What adjustment is required to restate retained earnings on January 1, 2018?
On October 1, 2019, the entity decided Finance costs 150,000
44. What amount of the development costs should be expensed on 2018? Distribution costs 920,000
*JOURNAL ENTRY#12 – To apply the retrospective restatement during 2018. to close one of its segment. The
Administrative expenses 680,000
segment had sales of P2,920,000 and
Unrealized Loss on Derivative contracts
expenses of P2,470,000. On December designated as cash flow hedge 180,000
45. Nadal Company reported net income of P700,000 for 2020. The entity declared and 31, 2019, the carrying amount of the Translation Gain on Foreign Operation 260,000
paid dividend of P150,000 in 2020. assets of the segment was P2,450,000 Income Tax Rate 30%
In the financial statements for the year ended December 31, 2019, the entity and fair value less cost of disposal was
reported retained earnings of P1,100,000 on January 1, 2019. P1,840,000. During 2019, the entity paid employee termination costs of P460,000 as a direct
The net income for 2019 was P600,000 and the entity declared and paid dividend of result of the discontinued segment.
P300,000 in 2019. Temporary differences from Odelay Company’s continuing operations between financial
In 2020, the entity discovered an error in the December 31, 2018 financial income and taxable income for the year are:
statements. The effect of the error was a P650,000 overstatement of net income for Tax Depreciation in excess of book depreciation 320,000
the year ended December 31, 2018 due to underdepreciation. Accrual for product liability claim in excess of actual claim 240,000
What amount should be reported as retained earnings on December 31, 2020? Reported instalment sales in excess of taxable instalment sales 950,000
Rent received in advance deferred at year-end but considered taxable 400,000
The interest revenue and share of profit of associate were recorded net of tax.
The administrative expenses includes a premium expense of P20,000 for an officer’s life
insurance policy in which the entity is the beneficiary.
46. What is the accounting income subject to tax?
47. What is the current tax expense?

*JOURNAL ENTRY #13&14 – recognition of deferred tax asset and deferred tax liability.
SET A Page 8 of 11
 51. What is the number of outstanding shares @ year-end?
48. What is the net income for 2019? 52. What is the unappropriated retained earnings at year-end?
49. What net amount should be reported as OCI that will reclassify to profit or loss for 53. What is the shareholders’ equity at year-end?
2019?

50. What is the comprehensive income for 2019?

Statement of Changes in Equity Blue Nile Corp, a wasting asset corporation, provided the following information @ year-end
Blue Zoo Corp provided the following information @ year-end:
Commercial Papers 1,200,000 Wasting asset @ cost 9,000,000
Financial Assets at Fair Value including cost of P180,000 Depletion for the current year based on 42,000 units
of Blue Zoo Corp shares acquired at P90 per share 2,360,000 extracted at P20 per unit 840,000
Bond Issue Cost 80,000 Inventory of resource deposits (5,000 units) 300,000
Subscription Receivable 860,000 Share Premium – OS 640,000
Cumulative Translation Adjustment – debit 464,900 Share Premium – PS 560,000
Sinking Fund 1,485,800 Capital Liquidated 480,000
Share Dividend Payable 435,500 Accounts Payable 1,290,000
Revaluation Surplus during the year 800,000 Accumulated Depletion 1,830,000
Bonds Payable @ Face Value, based on a contractual agreement with Preference Share Capital, at par 2,000,000
the bondholders, Blue Zoo Corp must appropriate equal to the Ordinary Share Capital, at par 3,000,000
carrying amount of the bonds @ year-end 2,000,000 Sales 7,850,000
Share Capital @ P100 par 5,000,000 Total Expenses 6,200,000
Subscribed Share Capital 1,400,000 Treasury Shares – Ordinary, at cost 520,000
Share Premium 2,186,950 Dividends paid this year but were declared last year 1,450,000
Premium on bonds Payable 140,000 Retained Earnings – beginning 475,000
Donation of Land @ fair value as government grant 1,600,000 Actuarial loss on defined benefit plan 380,000
Donation of Blue Zoo Corp shares @ original issuance of P115 per share 511,750 Revaluation surplus 500,000
Retained Earnings 2,785,780 Cumulative translation adjustment – credit 190,000
Cumulative Translation Gain on option contract designated Unrealized gain – trading securities 160,000
as fair value hedge 328,000 Unrealized loss – Financial Asset at fair value through OCI 270,000
Piecemeal Realization of surplus 240,000 Share in loss of associate 330,000
The total expenses includes the correct amount of cost of goods for the year.
The profit for the year was correctly computed and was directly transferred to retained
earnings and all dividends were deducted from retained earnings. The 10% share 54. What amount should be presented as reserves in the shareholders’ equity section of
dividend was declared during the year before subscriptions but after treasury shares the statement of financial position at year-end?
transactions. The market value at the date of declaration was P110 per share. The cash 55. What amount should be reported as shareholders’ equity @ year-end?
dividend was declared at the end of the year and payable the following year. 56. What is the maximum dividend that can be declared based on year-end balances?

SET A Page 9 of 11

DERIVATIVES
On January 1, 2017, Taal Company received a 5-year variable interest rate loan of
P4,000,000 with interest payment at the end of each year and the principal to be repaid on
December 31, 2021.
The interest rate for 2017 is 8% and the rate in each succeeding year is equal to a market
interest rate on January 1 of each year.
On January 1, 2017, Taal Company entered into a “receive variable pay fixed” interest rate
swap agreement with a financial institution.
The swap payments are made at the end of the year. This interest rate swap agreement is
designated as a cash flow hedge.
On January 1, 2018, the market rate of interest is 9%. The present value of an ordinary
annuity of 1 at 9% for four periods is 3.24.
On January 1, 2019, the market rate of interest is 11%. The present value of an ordinary
annuity of 1 at 11% for three periods is 2.44.
On January 1, 2020, the market rate of interest is 7%. The present value of an ordinary
annuity of 1 at 7% for two periods is 1.81.
On January 1, 2021, the market rate of interest is 10%. The present value of an ordinary
annuity of 1 at 10% for one period is 0.91.
57. What is the derivative asset / (liability) on December 31, 2017?
58. On December 31, 2018, what amount should be reported as unrealized gain/(loss) in
the OCI-Reserves in the Shareholders’ Equity Section of the Statement of Financial
Position?
59. What is the derivative asset / (liability) on December 31, 2019?
60. On December 31, 2020, what amount should be reported as interest expense?
*JOURNAL ENTRY #15-18 Journal entries on December 31, 2021. (4 entries)
Naga Company produces bottled grape juice concentrate is typically bought and sold by the
pound. The entity uses 50,000 pounds of grape juice concentrate each month.
On November 1, 2019, the entity entered into a grape juice concentrate futures contract as a
cash flow hedge to buy 50,000 pounds of concentrate on February 1, 2020 at a price of P50
per pound. The market price on December 31, 2019 is P42 per pound and on February 1,
2020 is P38 per pound. The market rate of interest is 11%. The periodic system is used.
61. What amount should be recognized on December 31, 2019 as derivative asset /
(liability)?
62. What is the cash settlement to the speculator on February 1, 2020?
63. What is the cost of purchases on February 1, 2020?
*JOURNAL ENTRY #19-21 Journal entries (3) on February 1, 2019.
Bicol Company uses approximately 18,000 units of raw material in its manufacturing
operations. On December 1, 2020, the entity purchased a call option to buy 18,000 units of
raw material on April 1, 2021 at a strike price of P100 per unit.
The entity paid P20,000 for the call option. The entity designated the call option as a cash flow
hedge against price fluctuation for its July purchase.
The market price of the raw material is P105 on December 31, 2020 and P98 on April 1, 2021.
64. What is the cash settlement to the speculator on April 1, 2021?
65. What is the cost of purchases on April 1, 2021?
*JOURNAL ENTRY #22-23 Journal entries (2) on April 1, 2021.
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