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:

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

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

Cash, including P1,000,000 sinking fund and P500,000 value added tax fund 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
Deferred tax asset 550,000
Deposit made on inventory to be delivered in 18 months 150,000
What total amount of current assets should be reported December 31, 2021?
a. 11,200,000
b. 11,250,000
c. 9,600,000
d. 9,750,000
3. 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
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4. An entity provided the following unadjusted balances at year-end:

Cash 850,000 Share premium 600,000

Accounts receivable 1,650,000 Retained earnings 1,100,000
Prepaid taxes 600,000 Translation adjustment – debit 500,000
Accounts payable 400,000 Revenue 3,600,000
Share capital 500,000 Expenses 2,600,000

During the current year, estimated tax payments of P600,000 were charged to prepaid taxes. The
entity has not yet recorded income tax expense. There were no differences between financial
income and taxable tax income and the tax rate is 25%. Included in accounts receivable is
P500,000 due from a customer. Special terms granted to this customer require payment in equal
semiannual installments of P125,000 every April 1 and October 1. What amount should be reported
as total current assets?

a. 2,600,000
b. 2,250,000
c. 2,475,000
d. 3,100,000

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 be reported as “adjusting events” on December 31, 2021?
a. 6,600,000
b. 7,000,000
c. 9,600,000
d. 0
- END-
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