ACTIVITY 1

PROBLEM 2-2 (IAA)

Socorro Corporation
Statement of Financial Position
December 31, 2019

ASSETS
Current Assets: Note
Cash and cash equivalents (1) 700,000
Trade and other receivable (2) 700,000
Inventories 600,000
Prepaid expenses (3) 50,000
Total current assets 2,050,000

Noncurrent assets:
Property, plant and equipment (4) 4,150,000
Long-term Investment (5) 1,000,000
Investment property (6) 500,000
Intangible assets (7) 550,000
Other noncurrent assets (8) 450,000
Total noncurrent assets 6,650,000
Total assets 8,700,000

EQUITY AND LIABILITIES

Current liabilities:
Trade and other payables (9) 820,000
Serial bonds payable-current
portion 100,000
Total current liabilities 920,000

Noncurrent liabilities:
Serial bonds payable-remaining portion 400,000
Unearned leasehold income-remaining portion 280,000
Total noncurrent liabilities 680,000

Equity:
Share capital (10) 5,150,000
Reserves (11) 1,050,000
Retained earnings (12) 1,200,000
Treasury shares, at cost (300,000)
Total equity 7,100,000
Total liabilities and equity 8,700,000
Note 1 - Cash and cash equivalents
Cash 500,000
Money market placement 200,000
Total 700,000

Note 2 - Trade and other receivable

Accounts receivable 750,000
Allowance for doubtful accounts (50,000)
Total trade and other receivable 700,000

Note 3 - Prepaid Expenses

Store supplies 50,000

Note 4 - Property, plant and

equipment
Accumulated Book
Cost depreciation value
Land 400,000 - 400,000
Building 3,500,000 500,000 3,000,000
Equipment 1,000,000 250,000 750,000
Total 4,900,000 750,000 4,150,000

Note 5 - Long-term Investment

Investment in bonds 1,000,000

Note 6 - Investment property

Land for undetermined use 500,000

Note 7 - Intangible assets

Trademark 300,000
Patent 250,000
Total 550,000

Note 8 - Other noncurrent assets

Advances to officers 150,000
Restricted foreign deposit 300,000
Total 450,000

Note 9 - Trade and other payables

Accounts payable 500,000
Note payable 100,000
Income tax payable 150,000
Unearned leasehold income-current portion 70,000
Total 820,000

Note 10 - Common stock

Share capital issued 5,000,000
Stock divident payable 150,000
Total 5,150,000

Note 11 - Reserves
Share premium 250,000
Retained earnings appropriated for plant expansion 500,000
Retained earnings appropriated for treasury share 300,000
Total reserves 1,050,000

Note 12 - Retained earnings

Retained earnings upappropriated 1,500,000
Appropriation for treasury share 300,000
Adjusted balance 1,200,000

Problem 2-4 (AICPA Adapted)

Boracay Company
Statement of Financial Position
December 31,2019

ASSETS
Current Assets: Note
Cash and cash equivalents (1) 1,200,000
Financial assets at fair value 400,000
Trade receivables (2) 1,000,000
Inventory (1,300,000 - 50,000 - 250,000) 1,000,000
Prepaid Expenses (3) 50,000
Total current assets 3,650,000

Noncurrent assets:
Property, plant and equipment (4) 3,950,000
Goodwill 100,000
Total noncurrent assets 4,050,000
Total assets 7,700,000

EQUITY AND LIABILITIES

Current liabilities:
Trade and other payables (5) 2,050,000

Noncurrent liabilities:
Mortgage payable 2,000,000

Equity:
Ordinary share capital 3,000,000
Share premium 200,000
Retained earnings (6) 450,000
Total equity 3,650,000
Total liabilities and equity 7,700,000

Note 1 - Cash and cash

equivalents
Cash in bank 700,000
Money market placement 500,000
Total 1,200,000

Note 2 - Trade receivables

Accounts receivable 800,000
Notes receivable 200,000
Total 1,000,000

Note 3 - Prepaid Expenses

Office supplies 50,000

Note 4 - Property, plant and

equipment
Accumulated Carrying
Cost depreciation amount
Land 1,000,000 - 1,000,000
Building 3,000,000 300,000 2,700,000
Office equipment 250,000 - 250,000
Total 4,250,000 300,000 3,950,000

Note 5 - Trade accounts and other payables

Accounts payable 1,500,000
Withholding tax payable 100,000
Accrued salaries payable 250,000
Accrued interest payable 200,000
 Total 2,050,000

Note 6 - Retained earnings

Net assets per book 4,200,000
Contributed capital 3,200,000
Unadjusted retained earnings 1,000,000
Unrecorded expenses:
Salaries 250,000
Deppreciation on building (3,000,000/20x2) 300,000 550,000
Total 450,000

Problem 2-18 (AICPA Adapted)

1. Total current assets? D

Cash 600,000
Accounts receivable 2,800,000
Inventory 2,000,000
Accounts receivable - installments
(125,000 x 4) (500,000)
Total current assets 4,900,000

2. Total current liabilities? A

Accounts payable and accrued liabilities 1,800,000
Income tax payable 900,000
Total current liabilities 2,700,000

3. Retained earnings? C

Net sales and other revenue 15,000,000

Costs and expenses (10,000,000)
Income before income tax 5,000,000
Income tax (30% x 5,000,000) 1,500,000
Net income 3,500,000
Retained earnings - January 1 3,500,000
Retained earnings - December 31 7,000,000

PROBLEMS
Problem 3-1 Multiple choice (PAS 1)
 1. D
2. A
3. C
4. C
5. B

Problem 3-2 Multiple choice (IAA)

1. B
2. D
3. D
4. B
5. D
6. D
Problem 3-3 Multiple choice (AICPA Adapted)
1. A
2. C
3. B
4. D
5. C
6. B
7. C
8. A