Trade and Other Payables

1. Which of the following is not a category of c. An entity shall classify all financial liabilities
financial liabilities defined in PAS 39? as subsequently measured at amortized cost
a. Financial liabilities held for trading. using the effective interest method, except as
b. Financial liabilities designated at fair value specified in PAS 39 and PFRS 9.
through profit or loss. d. An entity may reclassify financial liabilities
c. Financial liabilities designated at fair value when, and only when, it changes its business
through other comprehensive income. model for managing financial liabilities.
d. Financial liabilities at amortized cost.
5. The Skywarp Company has the following items
2. Held for trading is a financial liability that: included in its receivables and payables account:
a. Is incurred principally for the purpose Items Debit Credit
repurchasing it in the near term. Due from customers P156,000
b. On initial recognition is part of a portfolio of Payables to creditors for
identified financial instruments that are merchandise P62,000
managed together and for which there is Note receivable, long-term 80,000
evidence of a recent actual pattern of short- Allowance for bad debts 4,000
term profit-taking. Due from employees 2,200
c. Is a derivative, except for a derivative that is Cash dividend payable 24,000
a financial guarantee contract or a designated Special receivable,
and effective hedging instrument. dishonored note* 22,000
d. Any of the above. Accrued wages 2,400
Rent received in advance 1,600
3. At what amount is a financial liability measured Insurance premiums paid in
on initial recognition? advance 1,200
a. The consideration received for the financial Mortgage payable 40,000
liability. * Collection probable in two years.
b. Acquisition cost. Acquisition cost is the
consideration received plus any directly Compute the amount to be reported as trade and
attributable transaction costs to the issuance other payables.
of the financial liability. a. P62,000 c. P86,000
c. Fair value. For items that are not measured at b. P64,400 d. P88,400
fair value through profit or loss, transaction Cabrera
costs are also included in the initial
measurement. 6. Case Corporation had accounts payable of
d. Zero. P5,000,000 recorded in the general ledger as of
December 31, 2016 before consideration of the
Measurement of Financial Liabilities following unrecorded transactions:
PAS 39 Invoice Date Date
date Amount shipped received FOB terms
Sub- 1-3-17 P400,000 12-22-16 12-24-16 Destination
Category Initial sequent Changes in FV Shipping
FL@FVTPL FV FV P/L 1-2-17 650,000 12-28-16 1-2-17
point
FL@AC FV - TC AC Ignore 12-26- Shipping
600,000 1-2-17 1-3-17
16 point
PFRS 9 1-10-17 450,000 12-31-16 1-5-17 Destination
Sub- In the December 31, 2016 statement of
Category Initial sequent Changes in FV financial position, the accounts payable should
FL@FV FV FV P/L be reported in the amount of
(Trading) a. P5,000,000 c. P6,050,000
FL@FV FV FV Credit risk – b. P5,400,000 d. P7,100,000
(Designated OCI
) Others – P/L 7. The balance in Iwig Co.'s accounts payable
FL@AC FV - TC AC Ignore account at December 31, 2016 was P400,000
before any necessary year-end adjustments
4. Which statement is incorrect regarding relating to the following:
accounting for financial liabilities in accordance a) On December 28, 2016, Iwig purchased and
with PAS 39 and PFRS9? received goods for P40,000, terms 2/10,
a. An entity shall recognize a financial liability in n/30. Iwig records purchases and accounts
its statement of financial position when, and payable at net amounts. The invoice was
only when, the entity becomes party to the recorded and paid January 3, 2017.
contractual provisions of the instrument. b) Goods were in transit to Iwig from a vendor
b. An entity shall remove a financial liability on December 31, 2016. The invoice cost
from its statement of financial position when, was P50,000. The goods were shipped f.o.b.
and only when, it is extinguished.
 shipping point on December 29, 2016 and
were received on January 4, 2017.
c) Goods shipped f.o.b. destination on
December 21, 2016 from a vendor to Iwig
were received on January 6, 2017. The
invoice cost was P25,000.
d) Goods shipped to Iwig, f.o.b. shipping point
on December 20, 2016, from a vendor were
lost in transit. The invoice price was
P20,000. On January 5, 2017, Iwig filed a
P20,000 claim against the common carrier.
In Iwig's December 31, 2016 statement of
financial position, the accounts payable should be
a. P439,200 c. P509,200
b. P489,200 d. P534,200
P59 C08 Kieso TB, 11th ed
8. Eagle, Inc. is preparing its financial statements
for the year ended December 31, 2016.
Accounts payable amounted to P200,000 before
any necessary year-end adjustment related to
the following:
• At December 31, 2016, Eagle has a P50,000
debit balance in its accounts payable to Twist,
a supplier, resulting from a P50,000 advance
payment for goods to be manufactured to
Eagle's specifications.
• On December 27, 2016, Eagle wrote and
recorded checks to creditors totaling P30,000
that were mailed on January 10, 2017.
• Checks in the amount of P25,000 were
written to vendors and recorded on December
29, 2016. The checks were dated January 5,
2017.
What amount should Eagle report as accounts
payable in its December 31, 2016 statement of
financial position?
a. P305,000 c. P275,000
b. P280,000 d. P205,000
9. Dolan Co. pays all salaried employees on a
biweekly basis. Overtime pay, however, is paid
in the next biweekly period. Dolan accrues
salaries expense only at its December 31 year
end. Data relating to salaries earned in
December 2016 are as follows:
• Last payroll was paid on 12/26/16, for the 2-
week period ended 12/26/16.
• Overtime pay earned in the 2-week period
ended 12/26/16 was P5,000.
• Remaining work days in 2016 were December 29,
30, 31, on which days there was no overtime.
• The recurring biweekly salaries total P90,000.
Assuming a five-day work week, Dolan should
record a liability at December 31, 2016 for
accrued salaries of
a. P27,000 c. P32,000
b. P54,000 d. P59,000
10. Candelaria Company’s president gets an annual
bonus of 10% of net income after bonus and
income tax. Assume the tax rate of 30% and the
correct income before bonus and tax is
P9,600,000. How much is the bonus payable to
the president?
a. P 722,600 c. P395,000
b. P2,240,000 d. P628,000
11. Mark Company pays its outside salespersons
fixed monthly salaries and commissions based on
net sales. Sales commissions are computed and
paid on a monthly basis (in the month following
the month of sale) and the fixed salaries are
treated as advances against commissions.
However, if the fixed salaries for salespersons
exceed their sales commissions earned for a
month, such excess is not charged back to them.
Pertinent data for the month of December for the
three salespersons are as follows:
Fixed Commission
Salesperso salaries Net sales rate
n
A P100,00 P 900,000 10%
0
B 150,000 2,500,000 10%
C 250,000 4,000,000 15%
What should Mark Company accrue for sales
commissions at December 31?
a. P940,000 c. P450,000
b. P440,000 d. P500,000
P57 M10 pp. 382 Wiley 07-08
12. Pythagoras Co. must determine the December
31, 2016 year-end accruals for advertising and
rent expenses. A P2,000 advertising bill was
received January 7, 2017. It related to costs of
P1,500 for advertisements in December 2016
issues and P500 for advertisements in January 2,
2017 issues of the newspaper. A store lease,
effective December 16, 2015, calls for fixed rent
of P4,800 per month payable 1 month from the
effective date and monthly thereafter. In
addition, rent equal to 5% of net sales over
P1,200,000 per calendar year is payable on
January 31 of the following year. Net sales for
2016 were P2,200,000. In its December 31,
2016 statement of financial position, Pythagoras
should report accrued liabilities of
a. P56,800 c. P56,300
b. P51,500 d. P53,900
13. On September 1, 2015, Little Rock Co. borrowed
on a P1,350,000 note payable from Dilly Bank.
The note bears interest at 12% and is payable in
three equal annual principal payments of
P450,000. On this date, the bank’s prime rate
was 11%. The first annual payment for interest
and principal was made on September 1, 2016.
At December 31, 2016, what amount should
Little Rock report as accrued interest payable?
a. P49,500 c. P54,000
b. P33,000 d. P36,000
14. On March 1, 2015, Fine Co. borrowed P10,000
and signed a two-year note bearing interest at
12% per annum compounded annually. Interest
is payable in full at maturity on February 28,
2017. What amount should Fine report as a
liability for accrued interest at December 31,
2016?
a. P 0 c. P1,200
b. P1,000 d. P2,320
 12/31/15 12/31/16
1. Daye Company’s salaried employees are paid
biweekly. Occasionally, advances made to Salaries expense during
employees are paid back by payroll deductions. the year 910,000
Information relating to salaries for the calendar Salaries paid during the
year 2016 is as follows: year (gross) 875,000
12/31/15 12/31/16 At December 31, 2016, what amount should
Employee advances P12,000 P18,000 Daye report for accrued salaries payable?
Accrued salaries 91,000 ? a. P126,000 c. P120,000
payable b. P108,000 d. P 35,000

PROBLEMS

1.Which of the following shall result in recognition of liabilities?

(a)Receipt of goods ordered from a supplier.
(b)Signing of employment contract by a new employee.
(c)Declaration of cash dividends on cumulative preferenceshares.
(d)Declaration of share dividends on ordinary shares.
v(e)Declaration of property dividends on ordinary shares.
(f)Receipt of goods to be sold for the account of the consignor.
(g)Receipt of cash from a customer for goods to be deliverednext month.
(h)Withholding of taxes on employees compensation
(i)Violation of the terms of a contract; it is more likely than notthat there will be outflow of resources,
amount of such outflow can be reasonably estimated.
(j)Violation of the terms of a contract; it is more likely than not(that there will be outflow of resources,
amount of such outflow cannot be reasonably estimated.
(k)Violation of the terms of a contract; it is less than probable but more than remote that there will be
outflow of economic benefits.
(l)Violation of the terms of agreement and, as a resuļt, it is not likely that there will be outflow of
economic benefits.
(m)Sale of goods with product warranty.
(n）Receipt of land and building from the city government.
(o)Sale of non-refundable tickets for a concert show that willbe staged three months from now.
(p)Signing of contract of lease that will take effect next monthfor the use of another entity's facilitiesq
(q）Sale of gift certificates redeemable in merchandise.

2.Determine the amount that will be recognized as a liability ineach of the following independent cases.

Case 1
none
In August 2016, the XYZ commenced a suit against DEF foralleged violation of anti-trust laws seeking
damages of P2,000,000. DEF denies the allegations, and as of December 31,2016, it is not likely that
DEF will pay any damages as a result of this lawsuit.

Case 2
800,000
In September 2016, the Garrison Company became involved inlawsuit. As a result of this litigation, it is
more likely than notthat Garrison will have to pay an amount ranging from P700,000to P1,000,000 but
P800,000 is considered to be the best estimate of the obligation.

Case 3
400,000
In the latter part of December 2016, Dallas Company's vehicle was involved in a collision with a truck of
Kansas Corporation. In January 2017, Kansas filed a suit against Dallas for damages to the vehicle.
Based on the police's incident report, it is probable that estimated damages between P300,000 and
P500,000 will be incurred by Dallas. Each point within that range of amounts is considered as likely as
any other point. Dallas issued its 2016 financial statements in March 2017.

Case 4
350,000
In the latter part of December 2016, Dallas Company's truck was involved in a collision with a car of
Kansas Corporation. InJanuary 2017, Kansas filed a suit against Dallas for damages tothe vehicle.
Based on the police's incident report, it is probable at December 31,2016 that estimated damages
between P300,000 and P500,000 will be incurred by Dallas. In February 2017, Kansas accepted Dallas
offer of P350,000 for reimbursement of damages on its car. Dallas issued its 2016 financial statements
in March 2017.

Case 5
During 2016 , the Going Steady Company sold appliances that offer product warranties against defects .
Based on the entity's and industry's experience , it is estimated that 60 % of the products sold have no
defects , 30 % have minor defects and 10 % have major defects . Estimated warranty costs were
P1,000,000 if all products sold have major defects and P200,000 if all products sold have minor defects
. Going Steady has already incurred P60,000 of warranty costs relating to appliances sold during 2016 .

Case 6
In October 2016 , Manila City government brought action against Harrison Company in the amount of
P1,900,000 for polluting Manila Bay . It is less than probable but more than remote that Manila City
government will be successful , but the amount of damages Harrison will have determinable at
December 31 , 2016 . to pay is not reasonably

3. The following transactions were completed by Jefferson Corporation during December 2016 :

Dec. 16 Purchased merchandise from Intel Company , P66,000 , terms 2/10 , n / 30 ; FOB shipping
point . Intel Company paid freight of P1,400 .

19 Received goods from Celeron Corporation , P72,000 ; terms : 3/10 , 2/15 , n / 30 .

26 Paid the account with Intel Company in full .

31 Paid the account with Celeron Corporation in full .

Required
Record the foregoing transactions in the books of Jefferson Corporation using the

( 1 ) gross method of recording purchases . ( 2 ) net method of recording purchases .

( b ) Give the necessary adjustment on December 31 assuming that Jefferson uses the net method and
assuming that the account with Celeron is still unpaid at December 31 .

4. Washington Company's accounts payable at December 31 , 2016 totaled P1,000,000 before any
necessary year - end adjustments relating to the following transactions and information :

On December 27 , 2016 , Washington wrote and issued checks to creditors totaling P350,000 .
The issuance of the checks was recorded on January 3 , 2017 .

On December 28 , 2016 , Washington purchased and received goods for P150,000 , terms 2/10 ,
n / 30 . Washington records purchases and accounts payable at net amounts . The invoice was
recorded and paid January 3 , 2017 .

Goods shipped F.O.B destination on December 20 , 2016 from a vendor to Washington were
received January 2 , 2017 . invoice cost was P65,000 . The purchase was recorded on The January 2 ,
2017 .
Goods costing P120,000 were purchased from NYC Trading . The goods were shipped by NYC
on December 28 , 2016 , F.O.B. shipping point . The goods , together with the invoice , were received
by Washington on January 4 , 2017 .
The accounts payable general ledger balance of P1,000,000 is net of P80,000 debit balance in
one supplier's account representing deposit on goods to be delivered in February 2017 .

REQUIRED :

What amount should Washington Company report as total accounts payable at December 31 , 2016 ?
997100