STATEMENT OF FINANCIAL POSITION

DISCUSSION EXERCISES
I. Liza Company provided you the following balances on December 31, 2023:

Cash overdraft 50,000

Accounts receivable 1,100,000
Allowance for doubtful accounts 200,000
Merchandise inventory 510,000
Prepaid rent 60,000
Building held for resale 1,800,000
Property, plant and equipment 5,780,000
Accumulated depreciation 1,940,000
Financial assets at Fair Value Through Profit or Loss 550,000
Investment property 1,300,000
Cash surrender value 310,000
Investment in subsidiary 3,900,000
Investment in associate 2,800,000
Financial assets at Fair Value Through Other Comprehensive Income 700,000
Financial assets at Amortized Cost 450,000
Goodwill 500,000
Prepaid insurance 120,000
Patent 160,000
Notes receivable (due in 2025) 220,000
Trademark 350,000
Deferred tax asset 80,000
Franchise 890,000
Customer list 40,000
Cash 1,900,000

a. What amount should be reported as current assets on December 31, 2023?

b. What amount should be reported as noncurrent assets on December 31, 2023?

II. The accounts below were taken from the adjusted trial balance of Diane Company as of December
31, 2023:

Cash on hand – P1,200,000; Checking Account in PNB Bank (Account No. 201-897-0002) – P670,000;
Checking Account in PNB Bank (Account No. 107-652-0003) – P(110,000); Cash in BPI Bank –
P(550,000); Cash equivalents – P540,000; Petty cash fund – P20,000; Investment in securities held
for trading, at fair value – P870,000; Investment in equity securities (at fair value through other
comprehensive income) – P2,500,000; Notes receivable – P920,000; Trade accounts receivable, net
of customers’ credit balance of P50,000 – P1,250,000; Allowance for doubtful accounts – P60,000;
Merchandise inventory including goods consigned from Janikka Company of P300,000 – P1,300,000;
Deferred tax asset which is expected to reverse in 2024 – P30,000; Retired equipment classified as
held for sale – P320,000; Long-term refundable deposits – P1,400,000; Land held as investment
property – P2,300,000; Cash surrender value of life insurance – P720,000; Investment in bonds –
P1,500,000; Accrued interest income – P12,000; and Cash in sinking fund (related to 12% Bonds
Payable of P1,500,000 due on June 30, 2024) – P1,600,000.

a. What amount should be reported as current assets on December 31, 2023?

b. What amount should be reported as noncurrent assets on December 31, 2023?

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III. On December 31, 2023, Leslie Company provided the following information:
Accounts payable, net of suppliers’ debit balance of P100,000 P 1,900,000
Advances from customers 280,000
Notes payable, 12% due October 31, 2025 1,700,000
Share dividends payable 380,000
Credit balance in customer’s account 50,000
5% Serial bonds payable (semiannual installment of P200,000) 2,000,000
Accrued interest on bonds payable 50,000
Advances from associates 160,000
Unearned rent income 30,000
Bonds payable, 6% due December 31, 2028 3,000,000
Premium on bonds payable 200,000
Amount due to suppliers 420,000
Cash dividends payable 140,000
Income tax payable 190,000
Mortgage payable, 9% due December 31, 2025 5,000,000
Estimated warranty liability 50,000
Current account in CTT Bank (220,000)
SSS premium payable 510,000
Unsecured notes payable, 8% due July 1, 2024 400,000
Accrued salaries expense 60,000
Contingent liability (accrual for possible loss on a lawsuit) 450,000
Deferred tax liability (expected to reverse in 2024) 25,000
Senior bonds payable, 7% due August 1, 2024 1,100,000

a. What amount should be reported as current liabilities on December 31, 2023?

b. What amount should be reported as noncurrent liabilities on December 31, 2023?

IV. As of December 31, 2023, Liezel Company has the following items: Notes payable including a bank
loan of P1,000,000 due December 31, 2025 – P3,000,000; Trade accounts payable net of accounts
with debit balance of P100,000 – P750,000; Employee income tax withheld – P40,000; 8% Bonds
payable (mature in five annual payments) – P2,500,000; Accrued interest on bonds – P25,000; Share
dividends payable – P150,000; Premium liability – P80,000; Warranty liability – P140,000; Income
tax payable; P280,000; Deferred tax liability (expected to be revered in 2024) – P80,000; 12% Notes
payable (due December 31, 2024) – P2,000,000; and 10% Notes Payable (due June 30, 2024) –
P1,500,000.

Additional information:
• On December 31, 2020, the entity consummated a noncancelable agreement with the lender
to refinance the 12% note on a long-term basis.
• Under the loan agreement for the 10% note payable, the entity has the discretion to refinance
the obligation for at least twelve months after December 31, 2023.
• On October 5, 2023, a suit was filed by a dismissed employees against the company asking for
P1,000,000 damages. The company’s lawyer believes it is probable that the suit will result in
a loss to the company, and the best estimate of the obligation as of December 31, 2023 was
P850,000.
• The entity was authorized to issue its financial statement on April 30, 2024.

a. What amount should be reported as current liabilities on December 31, 2023?

b. What amount should be reported as noncurrent liabilities on December 31, 2023?

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 V. Makoy Company provided the following data at December 31, 2023:
Ordinary share capital P 2,300,000
Preference share capital 1,200,000
Subscribed ordinary share capital 580,000
Subscription receivable - ordinary shares (12/31/25) 400,000
Retained earnings, January 1 1,800,000
Net sales 5,200,000
Cost of goods sold 2,800,000
Other comprehensive income 310,000
Treasury shares - ordinary, at Cost 240,000
Dividends declared 1,200,000
Share premium – ordinary 640,000
Share premium – preference 780,000
Revaluation surplus 1,100,000
Salaries expense 250,000
Utilities expense 120,000
Rent expense 190,000
Miscellaneous expenses 70,000
Interest expense 30,000
Income tax expense 370,000

What total amount should Makoy Company report as shareholders’ equity as of year-end?

MULTIPLE CHOICE QUESTIONS

1. The statement of financial position is useful for analyzing all of the following except
a. liquidity
b. profitability
c. solvency
d. financial flexibility

2. Which of the following is a current asset?

a. Cash surrender value of a life insurance policy of which the company is the beneficiary.
b. Investment in equity securities for the purpose of controlling the issuing company.
c. Cash designated for the purchase of tangible fixed assets.
d. Trade installment receivables normally collectible in 18 months.

3. Which of the following is not a negative element under the Property, Plant and Equipment
classification?
a. Accumulated depletion of mineral-bearing property
b. Accumulated depreciation of paved parking lot
c. Accumulated depreciation of buildings
d. Reserve for plant expansion

4. The refinancing of a currently maturing long-term debt on a long- term basis completed on or
before the reporting date requires that such debt be classified as a
a. current liability
b. non-current liability
c. current liability or non-current liability, at the option of the debtor
d. non-adjusting event that shall be disclosed in the notes to the financial statements

5. On December 31, 2017, a company lawyer determines that it is probable that the company will lose
a legal case filed by its suppliers. and estimates that the loss would be between P6 million and P10
million. On January 10, 2018, a settlement was made and the company paid P9 million. How should

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this be reported in the company financial statements for the year ended December 31, 2017, which
were issued on March 10, 2018?
a. As a loss of P10 million in the income statement.
b. As a provision of P8 million in the statement of financial statements.
c. As a provision of P9 million in the statement of financial position.
d. As a footnote only.

6. Which of the following would be reported in the current asset section of the statement of financial
position?
I. Building held for sale
II. Work in process inventory
III. Cash surrender value of life insurance
IV. Trading securities
V. Deferred tax asset

a. I, II, III, IV, and V

b. I and III
c. I, II, and III
d. I, II, and IV

For Numbers 7-8

On December 31, 2023, the following data are submitted by Manuel Trading:

Cash on hand and in bank, net of P50,000 bank overdraft 560,000

Petty cash (unreplenished petty cash expenses, P4,000) 10,000
Notes receivable 500,000
Accounts receivable, net of accounts with credit balance of P100,000 1,100,000
Merchandise inventory, including goods held on consignment of P180,000 1,480,000
Prepaid expenses 90,000
Accounts payable, net of accounts with debit balance of P50,000 600,000
Notes payable (due annually at P1,000,000 payable every May 31) 2,000,000
Accrued expenses 80,000

7. How much total current assets should be presented on the statement of financial position of
Manuel Trading on December 31, 2023?
a. P3,740,000
b. P3,756,000
c. P3,706,000
d. P3,606,000

8. How much total current liabilities should Manuel Trading present in its statement of financial
position on December 31, 2023?
a. P2,680,000
b. P1,880,000
c. P1,830,000
d. P1,780,000

For Numbers 9-10

An alphabetical list of account balances from the books of Laco Company on December 31, 2023 is
presented below:

Accounts payable 25,000

Cash surrender value of life insurance 29,000
Ordinary share capital, P100 par 1,000,000
Dividends declared 250,000
Mortgage payable (including P200,000 due in six months) 1,200,000

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Notes payable, 10% (due January 1, 2027) 1,500,000
Share premium- ordinary 250,000
Preference share capital, P200 par 450,000
Premium on notes payable 25,000
Profit and loss summary, credit balance 500,000
Retained earnings, January 1, 2023 550,000
Unearned rent income 33,000

9. How much was Laco Company's total current liabilities at December 31, 2023?
a. P1,000,000
b. P2,525,000
c. P2,550,000
d. P2,725,000

10. What is the total shareholders' equity at December 31, 2023?

a. P1,700,000
b. P1,725,000
c. P2,500,000
d. P2,525,000

Prepared by: Bernard Rodney D. Alvarez, CTT, RCA, MRITax

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