Practice set

Instruction:
1. Discuss the listed questions and
topics with the assigned
partner.
2. Brainstorm and understand to
solve the problems.
3. Submit your answer together
with the solution on or before
Nov 7,2022.

Partners:
1.An Arquil & Gelyn Rose Cabujat
2. Angie May Carriaga &May anne
Gabat & Lency Tabilona
3. Chevie Orillo & liezl Pol
4. Lizel Silva & Shajanah Sumagang

“Two heads are better than one”

 Fill in the blanks (highlighted one)
FSLI: Financial statement Initial recognition Subsequent recognition Pro forma computation Derecognition Reclassification
line items If any

Cash in bank Bank reconciliation: bank to Expensed/used When restricted or then

book model, book to book reclassify to cash restricted or
model , bank to bank model become an investment,
Book to bank model depends on the contracts
Cash on hand(petty cash) NA

Inventory Cost Net realizable value When sold or lost or damaged NA

Property plant and Cost Cost model or revaluation Cost model When sold or lost or damaged NA
equipment model :cost less accumulated When fully depreciated
depreciation less
accumulated impairment if
any
Revaluation model:
Revalued amount less
accumulated depreciation
less accumulated
impairment
Account Receivable
Trading securities Fair value Fair value Changes goes to profit or When sold
loss
Investment in associate
Investment in equity
securities
 Fill in the blanks (highlighted one)
FSLI: Financial statement Initial recognition Subsequent recognition Pro forma computation Derecognition Reclassification
line items If any

Financial asset at
amortized cost

Investment in debt
securities
Investment in bonds at
FVOCI
Non trading securities

Intangible asset:
Patent

IA: Copy right

IA: Franchise

IA: Research and

development cost
Practice 1
PE company, organized on March 1, 2018 has a very poor internal control system. The company’s cashier is also its accountant. After
9 months of operations, the company’s manager suspects that the accountant has been misappropriating company’s collections. You
have been engaged to audit the company’s accounts to determine the extent of fraud if any.
You started the audit November 15. On that date, the cash on hand per your surprise count was P5,140.Also on that date, the bank
confirmed that the balance of the company’s current account was P26,328. Your examination of the records reveals that a check for
P1,852 was outstanding on November 15. The company’s mark up is 40% of sales.
Further examination of the company’s records reveals the following balances at November 15,2018:
Ordinary share capital P300,000
Share Premium 20,000
Real Property purchased for cash 200,000
Mortgage Payable 80,000
Furniture and fixture (of the acquisition cost, P6,000 remain unpaid as of Nov 15) P29,000
Notes Payable –Bank 32,000
Accounts Payable- trade 46,284
Expenses Paid (excluding purchases) 60,756
Merchandise inventory at cost 93,920
Accounts receivable trade 85,380
Total sales 340,000
P1 Questions:
• How much was paid for inventory purchases?
• How much was collected from customers?
• How much is the cashier’s accountability at November 15,2018?
• What is the adjusted bank balance as of November 15,2018?
• The cash shortage as of November 15,2018, totaled_________?
Practice 2
Magnum Corp invested its excess ash in equity securities during 2018.
The business model for these investments is to profit from trading on
price changes.
As of December 31,2018, the equity investments portfolio consisted
the following:
Investment Quantity Cost Fair value
Lj. Inc 1,000 shares P45,000 63,000
Polland Co 2,000 shares 120,000 126,000
Alabang Corp 2,000 shares 216,000 180,000
318,000 369,000
P2 Questions:
• In the December 31,2018, statement of financial position, what
should be reported as carrying amount of the investments?
• In the 2018 income statement, what amount should be reported as
unrealized gain or loss?
Practice 3-continuation (practice set 2)
During the year 2019, Magnum Corp sold 2,000 shares of Polland Corp
for P114,000 and purchased 2,000 more shares of Lj. Inc and 1,000
shares of Dwarfy Company. On December 31,2019, Magnum’s equity
securities portfolio consisted of the following:
Investment Quantity Cost Fair value
Lj. Inc 1,000 shares P45,000 60,000
Lj. Inc 2,000 shares 99,00 120,000
Dwarfy Company 1,000 shares 48,000 36,000
Alabang Corp 2,000 shares 216,000 66,000
408,000 282,000
P3 Questions:
• What is the gain or loss on the sale of Polland Corp. investments?
• What is the carrying amount of the investment on December
31,2019?
• What amount of unrealized gain or loss should be report?ed in the
income statement for the year ended December 31,2019
Practice 4
The Snark Inc. reported income before taxes P842,650 for 2018 and P965,350 for 2019. The
company takes its annual physical count of inventory every December 31. Your audit revealed the
following information:
1. The price used for 1,500 units included in the 2018 ending inventory was P109. The correct
cost was P190 per year.
2. Goods costing P23,600 were received from a vendor on January 1, 2019. The shipment was
made on December 26,2018 under FOB shipping point term. The purchase was recorded in
2018 but the shipment was not included in the 2018 ending inventory.
3. Merchandise costing P64,750 was sold to customer on Dec 29, 2018. Snark was asked by the
customer to keep the merchandise until Jan 3,2019, when the customer would come and pick
it up. Although the sale was properly in 2018, the merchandise was included in the ending
inventory.
4. A supplier sold merchandise valued at P14,000 to Snark Inc. The merchandise was shipped FOB
shipping point on December 29,2018 and was received by Snark on December 31,2018. The
purchase was recorded in 2019 and the merchandise was not included in the 2018 ending
inventory.
P4 Questions:
• What is the adjusted income before taxes for the year ended
December 31,2018?
• What is the adjusted income before taxes for the year ended
December 31,2019?
Practice 5
Syete Company products are sold on payment terms 2/10,n/30. IN the past , more than 75% of the credit customers availed of
the discount by paying within the discount period. During the year ended December 31,2018, there has been an increased
number of customers taking the full 30 days. The company estimates that less than 60% of customers are taking advantage of the
discount. Expected credit loss as a percentage of gross credit sales have been increased from 1.5% provided in prior years to
about 4% in the current year.

It is normal that some receivables will prove uncollectible. In fact, annual bad debt write offs had been 1.5% of total credit sales for many
years. However, this rate has increased to 4% during the current year.
The account receivable balance at December 31,2018 is P3,000,000. The condition of this balance in terms of age and probability of collection
is presented below.
Proportion Age Categories Probability of collection
64% 1 to 10 days 99%
18% 11 to 30 days 97.5%
8% Past due 31 to 60 days 95%
5% Past due 61 to 120 days 80%
3% Past due 121 to 180 days 65%
2% Past due over 180 days 20%

The allowance for credit loss had a credit balance of P54,600 on January 1,2018.
The P640,000 expected credit loss provided during the year is based on the assumption that 4% of total credit sales will be uncollectible.
Account written off during the year totaled P585,000.
P5 Questions:
• What is the required allowance balance for December 31,2018?
• What is the net realizable value on December 31,2018?
• The company should report expected credit loss for 2018
of________?
• What is the total credit sales on 2018?