CPA REVIEW SCHOOL OF THE PHILIPPINES

Manila

FINANCIAL ACCOUNTING AND REPORTING VALIX/VALIX/ESCALA/SANTOS/DELA CRUZ

STATEMENT OF FINANCIAL POSITION

1. An entity provided the following information on December 31, 2021:

Cash in bank 4,000,000
Accounts receivable 8,000,000
Allowance for doubtful accounts 500,000
Notes receivable 2,500,000
Note receivable discounted 500,000
Inventory 4,500,000
Prepaid expenses 1,000,000
Deferred tax asset 2,500,000
Equipment classified as “held for sale” 2,000,000
The accounts receivable included sale price of P3,000,000 of unsold goods out on consignment at
125% of cost and excluded from ending inventory.
What amount should be reported as total current assets on December 31, 2021?
a. 20,400,000
b. 20,250,000
c. 20,900,000
d. 21,500,000

2. An entity provided the following information on December 31, 2021:

Accounts payable 2,000,000
Accrued expenses 800,000
Bonds payable 2,500,000
Premium on bonds payable 300,000
Deferred tax liability 500,000
Income tax payable 1,100,000
Cash dividend payable 600,000
Share dividend payable 400,000
Note payable – due March 1, 2022 1,500,000
What amount should be reported as total current liabilities?
a. 6,000,000
b. 6,400,000
c. 4,500,000
d. 6,500,000

3. An entity reported the following current assets at December 31, 2021:

Cash 5,000,000
Accounts receivable 2,000,000
Inventory, including goods received on consignment P200,000 800,000
Equity investment at FVPL 3,000,000
Equity investment at FVOCI 1,500,000
Prepaid expenses, including a deposit of P50,000 made on inventory to be
delivered in 18 months 150,000
Total current assets 12,450,000
The cash account included bond sinking fund P1,000,000 and cash held to pay value added taxes
P500,000.
What total amount of current assets should be reported December 31, 2021?
a. 11,200,000
b. 11,250,000
c. 9,700,000
d. 9,750,000
6803
 Page 2
4. An entity provided the following trial balance on December 31, 2021:
Cash overdraft ( 200,000) Property, plant and equipment, net 1,900,000
Accounts receivable, net 700,000 Accounts payable 700,000
Inventory 1,200,000 Share capital 3,000,000
Prepaid expenses 200,000 Share premium 500,000
Land held for resale 2,000,000 Retained earnings 1,600,000
Checks amounting to P600,000 were written to vendors and recorded on December 31, 2021
resulting in cash overdraft of P200,000. The checks were mailed on January 15, 2022. Land held
for resale was sold for cash on January 31, 2022.

1. What total amount should be reported as current assets?

a. 4,500,000
b. 4,100,000
c. 4,300,000
d. 2,500,000

2. What total amount should be reported as current liabilities?

a. 1,300,000
b. 1,500,000
c. 900,000
d. 700,000

5. An entity reported the following liability balances on December 31, 2021:

10% note payable issued on October 1, 2020, maturing October 1, 2022 2,000,000
12% note payable issued on March 1, 2020 maturing on March 1, 2022 4,000,000
Under the loan agreement, on December 31, 2021 the entity has an existing right to defer
settlement of the 10% note payable for at least twelve months after December 31, 2021. On March
1, 2022, the entire P4,000,000 balance of the 12% note payable was refinanced through issuance a
long-term obligation payable lump sum. The 2021 financial statements were issued on March 31,
2022. What amount of the notes payable should be classified as current on December 31, 2021?
a. 6,000,000
b. 4,000,000
c. 2,000,000
d. 0

6. The end of reporting period of an entity is December 31, 2021 and the financial statements for
2021 are authorized for issue on March 31, 2022.
• The entity had equity investments held for trading. On December 31, 2021, these investments
were recorded at the fair value of P5,000,000. During the period up to February 15, 2022, there
was a steady decline in the fair value of the shares in the portfolio and on February 15, 2022,
the fair value had fallen to P2,000,000.
• The entity had reported contingent liability on December 31, 2021 related to court case in
which the entity was the defendant. The case was not heard until the first week of February
2022. On March 1, 2022, the judge handed down a decision against the entity and determined
that the entity was liable to pay damages and costs totaling P3,000,000.
• On December 31, 2021 the entity had accounts receivable from a large customer in the amount
of P4,000,000. On March 15, 2022, the entity was advised in writing by the liquidator of the
said customer that the customer was insolvent and that only 10% of the accounts receivable
will paid on December 31, 2022.
What total amount should reported as “adjusting events” on December 31, 2021?
a. 6,600,000
b. 7,000,000
c. 9,600,000
d. 0
- END-
6803