CPAR1- Financial Accounting and Reporting Review Notes #1

COLLEGE OF BUSINESS

ACCOUNTANCY DEPARTMENT

Ritsyl O. Cainoy-Serona, CPA, MM

FAR Instructor

Topics/Outcomes:

2.0 Presentation of Financial Statements

The examinees must be able to:

2.1.1 Describe any of the general features of financial statements (TOA)
2.1.2 Compute current and non-current assets
2.1.3 Compute current liabilities and non-current liabilities
2.1.4 Compute profit from continuing operations.
2.1.5 Compute revenues, expenses, or profit or loss from discontinued operations
2.1.6 Compute cash flows from operating, investing or financing activities
2.1.7 Distinguish adjusting events from non-adjusting events after the reporting period

MULTIPLE CHOICE QUESTIONS

1. Which of the following statements is correct?

a. PAS 1 Presentation of Financial Statements prescribes the basis for presentation of general and special purpose
financial statements to improve both inter-comparability and intra-comparability.
b. Intra-comparability is also referred to as horizontal comparability while inter-comparability is also referred to as
vertical comparability.
c. Working capital is the net amount of a company’s relatively liquid resources. It is the excess of total assets over
total liabilities.
d. Equity is the residual interest in the net assets of an entity.

2. According to PAS 1, these are financial statements intended to serve the needs of users who do not have the authority
to demand financial reports tailored for their own needs.
a. General purpose financial statements c. Regular financial statements
b. Common purpose financial statements d. All-purpose financial statements

3. The assessment of an entity’s going concern shall cover a minimum period of

a. one year b. three months c. three years d. any of these

4. In which of the following instances would a liability that would otherwise be presented as current is presented as
noncurrent?
a. The liability is payable on demand but the entity estimates that it is probable that the lender will not demand
payment within 12 months after the reporting period.
b. The liability is payable on demand but the lender promises the entity after the reporting period that the lender
will not demand payment in the next 12 months.
c. The entity enters into a refinancing agreement after the reporting period but before the financial statements are
authorized for issue.
d. The entity enters into a refinancing agreement and the refinancing agreement is completed by the balance sheet
date.

5. In a classified balance sheet, deferred tax assets/liabilities are presented as

a. non-current items if the deferred taxes are not expected to reverse within 12 months after the reporting period
b. noncurrent items
c. current items
d. a or c

6. General purpose financial statements are those statements that cater to the
a. common and specific needs of a wide range of external and internal users.
b. common needs of a wide range of external and internal users.
c. common needs of a wide range of external users.
d. specific needs of a wide range of external users.
CPAR1- Financial Accounting and Reporting Review Notes #1
7. In virtually all circumstances, a fair presentation is achieved by compliance with applicable IFRSs. A fair presentation
also requires an entity: (choose the incorrect statement)
a. to select and apply accounting policies in accordance with PAS 8 Accounting Policies, Changes in Accounting
Estimates and Errors. PAS 8 sets out a hierarchy of authoritative guidance that management considers in the
absence of a Standard or an Interpretation that specifically applies to an item.
b. to present information, including accounting policies, in a manner that provides relevant, reliable, comparable
and understandable information.
c. to provide additional disclosures when compliance with the specific requirements in PFRSs is insufficient to
enable users to understand the impact of particular transactions, other events and conditions on the entity’s
financial position and financial performance.
d. to establish a system of internal control the responsibility for which is the entity’s management. Furthermore, the
entities financial statements should be audited by an independent external party at least annually.

8. Each component of the financial statements shall be identified clearly. In addition, the following information shall be
displayed prominently, and repeated when it is necessary for a proper understanding of the information presented:
I. The name of the reporting entity or other means of identification, and any change in that information from the
preceding balance sheet date;
II. Whether the financial statements cover the individual entity or a group of entities;
III. The balance sheet date or the period covered by the financial statements, whichever is appropriate to that
component of the financial statements;
IV. The presentation currency, as defined in PAS 21 The Effects of Changes in Foreign Exchange Rates
V. The level of rounding used in presenting amounts in the financial statements.
a. I, II, III b. I, II, III, IV c. I, II, IV, V d. I, II, III, IV, V

9. When an entity’s balance sheet date changes and the annual financial statements are presented for a period longer or
shorter than one year, an entity shall disclose, in addition to the period covered by the financial statements:
I. The reason for using a longer or shorter period
II. The fact that comparative amounts for the income statement, statement of changes in equity, cash flow statement
and related notes are not entirely comparable
III. The amounts charged to the beginning balance of the retained earnings, net of tax
IV. Pro-forma financial statements, as a supplemental information in the notes
a. I, II b. I, III c. I, III, IV d. I, II, III, IV

10. All of the following statements are correct, except

a. The operating cycle of an entity is the time between the acquisition of assets for processing and their realization
in cash or cash equivalents.
b. When the entity’s normal operating cycle is not clearly identifiable, its duration is presumed to be twelve months.
c. Current assets include assets (such as inventories and trade receivables) that are sold, consumed or realized as
part of the normal operating cycle even when they are not expected to be realized within twelve months after the
balance sheet date.
d. Some liabilities are part of the working capital used in the entity’s normal operating cycle. Such operating items
are classified as current liabilities even if they are due to be settled more than twelve months after the balance
sheet date.
e. When an entity presents current and non-current assets and current and non-current liabilities as separate
classifications on the face of its balance sheet, it shall classify deferred tax assets (liabilities) as current assets
(liabilities) if the deferred tax assets (liabilities) are expected to reverse within twelve months after the end of
reporting period.

11. Below are the account balances prepared by the bookkeeper for SQUELCH TO SILENCE Company as of December
31, 20x1:
Assets Liabilities
Cash 30,000 Accounts payable 40,000
Accounts receivable, net 88,000 Notes payable 200,000
Inventory 80,000
Prepaid income tax 16,000
Prepaid assets 10,000
Investment in subsidiary 20,000
Land held for sale 56,000
Property, plant and equipment 100,000
Totals 400,000 240,000

Additional information:
- Cash consists of the following:
Petty cash fund (unreplenished petty cash expenses, ₱3,000) 4,000
CPAR1- Financial Accounting and Reporting Review Notes #1
Cash in bank (20,000)
Payroll fund 28,000
Tax fund 14,000
Cash to be contributed to a sinking fund set up for the retirement
of bonds maturing on December 31, 20x3 4,000
Total Cash 30,000

- Checks amounting to ₱61,000 were written to suppliers and recorded on December 30, 20x1, resulting to a bank
overdraft of ₱20,000. The checks were mailed on January 5, 20x2.

- Accounts receivable consists of the following:

Accounts receivable 80,000
Allowance for uncollectability ( 10,000)
Credit balance in customers’ accounts ( 6,000)
Selling price of unsold goods sent on consignment to QUELL, Inc.
at 120% of cost and excluded from SQUELCH’s inventory 24,000
Accounts receivable, net 88,000

- The inventory includes cost of goods amounting to ₱20,000 that are expected to be sold beyond 12 months but within
the ordinary course of business. Also, the inventory includes cost of consigned goods received on consignment from
Alpha-Numerix Co. amounting to ₱10,000.
- Prepaid income tax represents excess of payments for quarterly corporate income taxes during 20x1 over the actual
annual corporate income tax as of December 31, 20x1.
- Prepaid assets includes a ₱4,000 security deposit on an operating lease which is expected to expire on March 31, 20x3.
The security deposit will be received on lease expiration.
- The land qualified for classification as “asset held for sale” under PFRS 5 Non-current Assets Held for Sale and
Discontinued Operations as of December 31, 20x1.
- Accounts payable is net of ₱12,000 debit balance in suppliers’ accounts. Accounts payable includes the cost of goods
held on consignment from Alpha-Numerix Co. which were included in inventory.
- The notes payable are dated July 1, 20x1 and are due on July 1, 20x4. The notes payable bears an annual interest rate
of 10%. Interest is payable annually.
How much is the adjusted working capital? __________

12. The ledger of INFIRM SICK Co. as of December 31, 20x1 includes the following:

10% Note payable 80,000

12% Note payable 120,000
14% Mortgage note payable 60,000
Interest payable -
Additional information:
- INFIRM Co.’s financial statements were authorized for issue on April 15, 20x2.
- The 10% note payable is due on July 1, 20x2 and pays semi-annual interest every July 1 and December 31. On January 28,
20x2, INFIRM Co. entered into a refinancing agreement with a bank to refinance the entire note by issuing a long-term
obligation.
- The 12% note payable is due on March 31, 20x2 and pays annual interest every March 31. On January 31, 20x2, INFIRM
Co. extended the maturity of the note to March 31, 20x3 under the existing loan agreement. The extension of maturity
date is at the option of INFIRM.
- The 14% mortgage note is due on December 31, 20x9. Per agreement with the creditor, INFIRM is to pay quarterly
interests on the note, failure to do so will render the note payable on demand. INFIRM failed to pay the 3rd and 4th
quarterly interests on the note during 20x1.

How much is the total current liabilities? __________

Use the following information for the next three questions:

The ledger of COLTISH UNDISCIPLINED Co. in 20x1 includes the following:
Jan. 1, 20x1 Dec. 31, 20x1
Current assets 1,200,000 ?
Noncurrent assets 4,000,000 ?
Current liabilities 900,000 1,000,000
Noncurrent liabilities ? 3,000,000

Additional information:
- COLTISH’s working capital as of December 31, 20x1 is twice as much as the working capital as of January 1, 20x1.
CPAR1- Financial Accounting and Reporting Review Notes #1
- Total equity as of January 1, 20x1 is ₱1,700,000. Profit for the year is ₱2,400,000 while dividends declared amounted to
₱1,000,000. There were no other changes in equity during the year.

13. How much is the total noncurrent liabilities as of January 1, 20x1? __________
14. How much is the total current assets as of December 31, 20x1? __________
15. How much is the total noncurrent assets as of December 31, 20x1? __________

16. HARANGUE INFLATED SPEECH Co. had the following information for 20x1:
Accounts receivable turnover 10:1
Total assets turnover 2:1
Average receivables during the year ₱400,000
Total assets, January 1, 20x1 800,000

How much is the total assets as of December 31, 20x1? __________

Use the following information for the next two questions:

The following items were presented for the purpose of determining comprehensive income.
Profit for the year 2,000
Increase in revaluation surplus 1,000
Remeasurements of the net defined benefit liability (asset) - loss (200)
Net change in translation of foreign operation (400)
Dividends declared (100)
Stock rights 300
17. How much is the other comprehensive income? __________
18. How much is the total comprehensive income? __________

Use the following information for the next two questions:

The records of Afternoon Sun Co. show the following information:
Interest expense ₱24,000
Cost of inventories sold 600,000
Insurance expense 100,000
Advertising expense 20,000
Freight-out 10,000
Freight-in 4,000
Loss on sale of equipment 2,000
Legal and other professional fees 12,000
Rent expense (one-half occupied by sales department) 8,000
Sales commission expense 14,000
Doubtful accounts expense 16,000
19. How much is the total distribution (selling) costs? __________
20. How much is the total administrative expenses? __________

21. The records of SOIREE EVENING PARTY Co. showed the following information:
Increase in accounts receivable 100,000
Collections on accounts 800,000
Cash sales 120,000
Increase in inventory 40,000
Freight-in 14,000
Freight-out 13,000
Decrease in accounts payable 60,000
Disbursements for purchases 480,000
Purchase discounts 4,000
How much is the gross profit for the year? __________

22. The records of BRACKISH SALTY Co. showed the following information:
Accounts receivable, net, Jan. 1, 20x1 40,000
Accounts receivable, net, Dec. 31, 20x1 160,000
Accounts receivable turnover 4:1
Inventory, Jan. 1, 20x1 120,000
Inventory, Dec. 31, 20x1 60,000
Inventory turnover 3:1
How much is the gross profit for the year? __________

23. The records of SURLY BAD TEMPERED Co. showed the following information:
CPAR1- Financial Accounting and Reporting Review Notes #1
Decrease in accounts payable 60,000
Disbursements for purchases 440,000
Increase in raw materials 100,000
Direct labor is 50% of raw materials used in production
Manufacturing overhead is 20% of prime costs
Increase in work-in-process inventory 40,000
Decrease in finished goods inventory 50,000
How much is the cost of goods sold? __________

24. PRENTICE A LEARNER Co. reported profit after tax of ₱210,000. PRENTICE’s income tax rate is 30%. Operating
expenses for the year is 15% of sales and 25% of cost of sales. Other expenses were 10% of sales. How much is the
total sales? __________

25. The records of HACK TO CHOP Co. on December 31, 20x1 showed the following information:
Sales 2,000,000
Sales discounts 20,000
Cost of sales 800,000
Distribution costs 96,000
Administrative costs 240,000
Casualty loss on typhoon 40,000
Dividends received from investments in FVPL 24,000
Dividends received from investment in associate 48,000
Share in the profit of an associate 72,000
Dividends declared and paid 28,000
Interest expense 44,000
Unrealized gain on investments in FVPL 30,000
Unrealized gain on investments in FVOCI 38,000
Income tax expense 300,000
Loss on revaluation 26,000
Remeasurements of the net defined benefit liability (asset) - gain 22,000
Correction of understatement in depreciation in prior year 32,000
Translation adjustment of foreign operation - loss 8,000
How much is the profit for the year? __________

26. WASHY PALE Co. has the following information on December 31, 20x1:
- Cost of sales is ₱260,000.
- Operating expenses are 13% of sales and 20% of cost of sales.
- Interest expense is 5% of sales.
- Income tax rate is 30%. There were no temporary differences during the year.
How much is the profit for the year? __________

27. ABC Co., a seller of concrete aggregates, enters into the following contracts:
i. A contract with Delta Co. to deliver goods. Payment is due one month after delivery.
ii. A contract with Echo Co. for the sale of 300 units of each of Products X and Y. The contract states that the price
of Product Y will be retrospectively reduced by 50% if Echo Co. makes a cumulative purchase of at least 1,000
units of Product X within 6 months.
iii. A contract with Fafa Co. to deliver goods. At contract inception, Fafa Co. is broke. ABC Co. expects that it can
only collect 50% of the consideration.
iv. A contract with Gamma Co., an entity which is also engaged in the concrete aggregates business, to exchange
inventory to facilitate sales to customers in different geographical areas of operations.
Identify the contracts to which PFRS 15 Revenue from Contract with Customers may not be applied.
a. Delta and Echo b. Fafa and Gamma c. Fafa d. Gamma

28. Certain criteria must be met before a contract with a customer is accounted for under PFRS 15. Which of the
following precludes a contract from being accounted for under PFRS 15?
a. The consideration is collected in advanced
b. The contract is made orally
c. The contract does not result to a change in the risk, timing or amount of the entity’s future cash flows.
d. The contract is neither oral nor written but rather implied by the entity’s business practices.

29. ABC Co. enters into a contract with XYZ, Inc. to deliver 2 apples, 3 mangoes, and 5 potatoes for a total consideration
of ₱100. In accounting for the contract, which of the following is probably not true?
a. ABC Co. identifies three performance obligations in the contract.
CPAR1- Financial Accounting and Reporting Review Notes #1
b. ABC Co. allocates the ₱100 transaction price over the promises to deliver the apples, mangoes and potatoes on
the basis of relative stand-alone selling prices of those goods.
c. The allocation of the transaction price may result to the identification of a discount.
d. No revenue is recognized until all of the 2 apples, 3 mangoes and 5 potatoes are delivered even though the 2
apples were delivered first before the mangoes and potatoes.

30. ABC Co., a manufacturer and dealer of printing machines, had the following transactions during the period:
I. ABC Co. receives an order for the manufacture of a customized machine for a customer. The customer pays half
of the consideration at contract inception. The manufacturing lead time is 1 year. ABC Co. subcontracts a portion
of the manufacturing to XYZ, Inc., another manufacturer.
II. ABC Co. receives an order for a standard machine. Payment is due only after ABC Co. has delivered and
installed the machine. Additionally, the contract requires ABC Co. to perform free maintenance services over a 3-
month period after the machine is installed. ABC Co. completes the delivery and installation by the end of the
reporting period; however, the maintenance period is not yet over.
III. ABC Co. receives an order for 2 machines. The first machine is delivered at contract inception but the second
machine will be delivered after two months. Payment is due only after both machines are delivered. By the end
of the reporting period, the second machine is not yet delivered and the consideration is not yet collected.
Identify the contracts to which PFRS 15 Revenue from Contract with Customers may be applied.
a. Contract 1 c. Contracts 1, 2 and 3
b. Contract 3 d. None of these

31. It is an agreement between two or more parties that creates enforceable rights and obligations.
a. Obligation b. contract c. revenue d. any of these

32. According to PFRS 15 Revenue from Contracts with Customers contracts with customers are
a. Written b. oral c. implied d. any of these

33. The best evidence for the stand-alone selling price of a good or service is
a. the list price of the good or service
b. the contractually stated price of the good or service
c. the observable price at which the good or service can be sold separately under similar circumstances and to similar customers
d. the entity’s estimate of the stand-alone selling price

34. Revenue is recognized when (or as) the entity satisfies a performance obligation. According to PFRS 15 Revenue from
Contracts with Customers, revenue is measured at
a. the fair value of the consideration received or receivable
b. the transaction price
c. the stand-alone selling price of the good or services transferred
d. the amount of the transaction price allocated to the performance obligation satisfied.

35. During the period ABC Co. transfers goods to XYZ, Inc. Which of the following does not indicate that the transaction
is a consignment arrangement?
a. ABC Co. retains legal title over the goods until XYZ, Inc. sells them to third parties.
b. ABC Co. can require the return of any unsold goods within 60 days.
c. If XYZ, Inc. is not satisfied with the goods, XYZ, Inc. has the right to return them to ABC Co.
d. ABC Co. can require XYZ, Inc. to transfer the goods to 123 Corporation.
e. XYZ, Inc. is not obligated to remit any payment to ABC Co. unless XYZ, Inc. sells the goods

36. A non-refundable upfront fee that relates to administrative tasks to set up a contract is most likely accounted for as
a. a prepayment and recognized as revenue only when the related goods or services are transferred to the customer.
b. a contract asset that is presented separately from contract liability in the statement of financial position
c. as an outright expense
d. all of these

37. On 1 July 20X7, The Pyretus Company, a manufacturer of office furniture, supplied goods to The Natiso Company
for ₱120,000 on condition that this amount was paid in full on 1 July 20X8. Natiso had earlier rejected an alternative
offer from Pyretus whereby they could have bought the same goods by paying cash of ₱108,000 on 1 July 20X7.
Under PFRS 15, how much relating to this transaction should Pyretus recognize in profit or loss in respect of revenue
and interest income for the year ended 30 June 20X8? (Adapted)
Revenue __________ Interest Income __________

38. On 1 July 20X7 The Otakamiro Company handed over to a client a new computer system. The contract price for the
supply of the system and after sales support for 12 months was ₱800,000. Otakamiro estimates the cost of the after-
sales support at ₱120,000 and it normally marks up such costs by 50% when tendering for support contracts. Under
CPAR1- Financial Accounting and Reporting Review Notes #1
PFRS 15, the revenue Otakamiro should recognize in its financial year ended 31 December 20X7 is __________
(Adapted)

39. On October 1, 20x3, Acme Fuel Co. sold 100,000 gallons of heating oil to Karn Co. at ₱3 per gallon. Fifty thousand
gallons were delivered on December 15, 20x3, and the remaining 50,000 gallons were delivered on January 15, 20x4.
Payment terms were: 50% due on October 1, 20x3, 25% due on first delivery, and the remaining 25% due on second
delivery. What amount of revenue should Acme recognize from this sale during 20x3? __________ (Adapted)

40. In 20x2, Super Comics Corp. sold a comic strip to Fantasy, Inc. and will receive royalties of 20% of future revenues
associated with the comic strip. At December 31, 20x3, Super reported royalties receivable of ₱75,000 from Fantasy.
During 20x4, Super received royalty payments of ₱200,000. Fantasy reported revenues of ₱1,500,000 in 20x4 from the
comic strip. In its 20x4 income statement, what amount should Super report as royalty revenue? __________
(Adapted)

41. Lin Co., a distributor of machinery, bought a machine from the manufacturer in November 20x3 for ₱10,000. On
December 30, 20x3, Lin sold this machine to Zee Hardware for ₱15,000, under the following terms: 2% discount if
paid within thirty days, 1% discount if paid after thirty days but within sixty days, or payable in full within ninety
days if not paid within the discount periods. However, Zee had the right to return this machine to Lin if Zee was
unable to resell the machine before expiration of the ninety-day payment period, in which case Zee’s obligation to
Lin would be canceled. In Lin’s net sales for the year ended December 31, 20x3, how much should be included for the
sale of this machine to Zee? __________ (Adapted)

Use the following information for the next two questions:

DISCALCED BAREFOOTED NAKASAKASAKA Supermarket, Inc. awards customers loyalty points for their purchases.
A customer is entitled to one point for every ₱400 purchase. The points accumulated may be redeemed for awards in the
form of appliances, electronics, groceries and other household items. DISCALCED estimates the stand-alone selling price
of each point at ₱4.00. During the period, DISCALCED made total sales of ₱40M to cardholders.
42. How much sales revenue is recognized? __________
43. How much is the deferred revenue from loyalty points? __________

44. Wren Corp.’s trademark was licensed to Mont Co. for royalties of 15% of sales of the trademarked items. Royalties
are payable semiannually on March 15 for sales in July through December of the prior year, and on September 15 for
sales in January through June of the same year. Wren received the following royalties from Mont:
March 15 September 15
20x2 10,000 15,000
20x3 12,000 17,000

Mont estimated that sales of the trademarked items would total ₱60,000 for July through December 20x3. In Wren’s 20x3
income statement, the royalty revenue should be __________ (AICPA)

45. Rill Co. owns a 20% royalty interest in an oil well. Rill receives royalty payments on January 31 for the oil sold
between the previous June 1 and November 30, and on July 31 for oil sold between December 1 and May 31.
Production reports show the following oil sales:

June 1, 20x2 - November 30, 20x2 300,000

December 1, 20x2 - December 31, 20x2 50,000
December 1, 20x2 - May 31, 20x3 400,000
June 1, 20x3 - November 30, 20x3 325,000
December 1, 20x3 - December 31, 20x3 70,000

What amount should Rill report as royalty revenue for 20x3? __________ (AICPA)

46. Which of the following is included in profit from continuing operations?

a. extraordinary items c. other comprehensive income
b. discontinued operations d. income tax expense

47. In Baer Food Co.’s 20x3 single-step income statement, the section titled “Revenues” consisted of the following:

Net sales revenue 187,000

Results from discontinued operations:
Loss from discontinued component Z including loss on disposal of ₱1,200 16,400
Less: Tax benefit 4,000 (12,400)
Interest revenue 10,200
CPAR1- Financial Accounting and Reporting Review Notes #1
Gain on sale of equipment 4,700
Cumulative change in 20x1 and 20x2 income due to change in depreciation method (net
of ₱750 tax effect) 1,500
Total revenues 191,000

In the revenues section of the 20x3 income statement, Baer Food should have reported total revenues of __________

48. During 20x4, Lopez Corporation disposed of Pine Division, a major component of its business. Lopez realized a gain
of ₱500,000, net of taxes, on the sale of Pine's assets. Pine's operating losses, net of taxes, were ₱600,000 in 2004. How
should these facts be reported in Lopez's income statement for 2004?
Total Amount to be Included in
Income from Results of
Continuing Operations Discontinued Operations
a. 600,000 loss 500,000 gain
b. 100,000 loss 0
c. 0 100,000 loss
d. 500,000 gain 600,000 loss

49. According to PAS 1, dividends declared by an entity are disclosed in the

a. Statement of financial position d. Notes
b. Statement of profit or loss and OCI e. Any of these
c. Statement of changes in equity f. c or d

50. Which of the following shows a correct effect on equity?

Transaction Effect on equity
a. Issuance of shares Decrease
b. Retirement of shares Increase
c. Profit Decrease
d. Loss Decrease

51. The amount of profit or loss appears in which of the following financial statements?
a. Statement of financial position c. Statement of changes in equity
b. Statement of comprehensive income d. b and c

52. The statement of changes in equity is dated

a. as of a point in time. c. after some time.
b. for a period of time. d. Not dated

53. The first line in the Statement of changes in owner’s equity is

a. Profit or loss c. Additional contributions
b. Beginning capital d. Drawings

54. Stiggins Corporation had the following account balances for 2002:
31-Dec 1-Jan
Accounts Payable 67,200 58,200
Prepaid Rent Expense 24,600 37,200
Accounts Receivable (net) 84,000 66,600

Stiggins' 2002 profit is ₱450,000. What amount should Stiggins include as net cash provided by operating activities in its
2002 statement of cash flows? __________

55. Chow Company's 2002 income statement reported cost of goods sold as ₱135,000. Additional information is as
follows:
31-Dec-02 31-Dec-01
Inventory 30,000 22,500
Accounts Payable 13,000 19,500

If Chow uses the direct method, what amount should Chow report as cash paid to suppliers in its 2002 statement of cash
flows? __________

Use the following for the next three questions:

Frye Company uses the direct method to prepare its statement of cash flows. The company had the following cash flows
during 2002:
CPAR1- Financial Accounting and Reporting Review Notes #1
Cash receipts from the issuance of ordinary shares 400,000
Cash receipts from customers 200,000
Cash receipts from dividends on long-term investments 30,000
Cash receipts from repayment of loan made to
220,000
another entity
Cash payments for wages and other operating expenses 120,000
Cash payments for insurance 10,000
Cash payments for dividends 20,000
Cash payments for taxes 40,000
Cash payment to purchase land 80,000

56. The net cash provided by (used in) operating activities is __________
57. The net cash provided by (used in) investing activities is __________
58. The net cash provided by (used in) all activities is __________

59. According to PAS 10, these are those events, favorable and unfavorable, that occur between the end of the reporting
period and the date when the financial statements are authorized for issue.
a. Events after the reporting period c. Adjusting events
b. Non-adjusting events d. all of these

60. The Sarin Company's financial statements for the year ended 30 April 20X8 were approved by its finance director on
7 July 20X8 and a public announcement of its profit for the year was made on 10 July 20X8. The board of directors
authorised the financial statements for issue on 15 July 20X8 and they were approved by the shareholders on 20 July
20X8. Under PAS 10, after what date should consideration no longer be given as to whether the financial statements
to 30 April 20X8 need to reflect adjusting and non-adjusting events?
a. 7 July 20X8
b. 10 July 20X8
c. 15 July 20X8
d. 20 July 20X8 (Adapted)

61. Which of the following is an example of a non-adjusting event?

a. Sale of inventory for less than its carrying value shortly after the reporting period
b. Amounts received in respect of an insurance claim being negotiated at the period end
c. Destruction of a machine by fire after the reporting period
d. Bankruptcy of a major customer with a balance owing at the period end (Adapted)

62. One of Entity A’s delivery trucks had an accident on February 14, 20x2. The truck is totally wrecked and is uninsured.
Entity A’s December 31, 20x1 current-period financial statements were authorized for issue on March 31, 20x2. Entity
A asked you if it can write-off the carrying amount of the destroyed truck from its December 31, 20x1 statement of
financial position. What will you tell Entity A?
a. Yes, go ahead. Write-off the truck because the event is an adjusting event.
b. No. Don’t write-off the truck because the event is a non-adjusting event.
c. No. Don’t write-off the truck because the event is a non-adjusting event. You should, however, disclose the event
if you deem it to be material.
d. Yes, go ahead. I will support you.

63. Which of the following is most likely to be a non-adjusting event?

a. A major customer liquidates its business after the end of the reporting period.
b. The entity announces a major restructuring after the end of the reporting period.
c. The settlement after the reporting period of a court case that confirms that the entity has a present obligation at
the end of reporting period.
d. The determination after the reporting period of the cost of asset purchased, or the proceeds from asset sold,
before the end of reporting period.

“The name of the Lord is a strong tower; the righteous run to it and are safe.” (Proverbs 18:10)

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