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Problems Problems 15-1 (IAA)

The document contains 10 problems related to analyzing financial statements to determine net income. Each problem provides account balances and transactions for a company and asks the reader to calculate net income based on the information given. The problems cover a range of concepts including retained earnings, dividends, share capital, premiums, and asset/liability changes.

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sarah
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515 views

Problems Problems 15-1 (IAA)

The document contains 10 problems related to analyzing financial statements to determine net income. Each problem provides account balances and transactions for a company and asks the reader to calculate net income based on the information given. The problems cover a range of concepts including retained earnings, dividends, share capital, premiums, and asset/liability changes.

Uploaded by

sarah
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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PROBLEMS

Problems 15-1 (IAA)


On January 1, 2019, the statement of financial position of Racel Company
showed total assets of P5,000,000, total liabilities of P2,000,000 and
contributed capital of P2,000,000.
During the current year, the entity issued share capital of P500,000 par
value at a premium of P300,000. Dividend of P250,000 was paid on December
31, 2019.
The statement of financial position on December 31, 2019 showed total
assets of P7,500,000 and total liabilities of P3,200,000.
What is the net income for the current year?
a. 1,750,000
b. 1,000,000
c. 750,000
d. 500,000

Problems 15-2 (IAA)


Aubrey Company provided the following data at year-end:
2018 2019
Share capital (P100 par value) 5,000,000 5,750,000
Share premium 1,000,000 1,500,000
Retained earnings 3,500,000 4,500,000

During the current year, the entity declared and paid cash dividend of
P1,000,000 and also declared and issued a share dividend.
There were no other changes in shares issued and outstanding during the
year.
What is the net income for the current year?
a. 3,250,000
b. 2,000,000
c. 1,000,000
d. 2,750,000

Problems 15-3 (PHILCPA Adapted)


On December 31, 2019 Zeus Company showed shareholders’ equity of
P4,000,000. During the current year, the shareholders’ equity was
affected by:

 an Adjustment to retained earnings for overstatement of inventory on


December 31, 2018 in the amount of P200,000.
 Declared dividend of P400,000 of which P300,000 was paid in 2019.
 The share capital was split five for one.
 Net income for the year amounted to P700,000.
 The share capital of P3,000,000 remained unchanged during the year.
What is the retained earnings balance on January 1, 2019?
a. 700,000
b. 900,000
c. 800,000
d. 500,000
Problems 15-4 (AICPA Adapted)
On December 31, 2019, Melissa Company showed shareholders’ equity of
P5,000,000.
The share capital of P3,000,000 remained unchanged during the year. The
transactions which affected the equity were:

 An adjustment of retained earnings for 2018 100,000


overdepreciation

 Gain on sale of treasury shares 300,000


 Dividend declared, of which P400,000 was paid 600,000
 Net income for the current year 800,000

What is the retained earnings balance on January 1, 2019?


a. 1,400,000
b. 1,700,000
c. 1,200,000
d. 1,600,000

Problems 15-5 (AICPA Adapted)


Vela Company reported the following increases in account balances during
the current year:
Assets 8,900,000
Liabilities 2,700,000
Share capital 6,000,000
Share premium 600,000

There were no changes in retained earnings other than for a dividend


payment of P1,300,000.
What was the net income for the current year?
a. 1,700,000
b. 1,300,000
c. 900,000
d. 400,000
Problems 15-6 (IAA)
Lanao Company showed the following increase (decrease) in ledger account
balances during the current year:
Cash 800,000
Accounts receivable (400,000)
Inventory 300,000
Equipment 950,000
Note payable-bank 500,000
Accounts payable (600,000)
Share capital 700,000
Share premium 300,000

There were no transactions affecting retained earnings other than a


P1,500,000 cash dividend and a P250,000 prior period error from
understatement of ending inventory.
What was the net income for the current year?
a. 2,000,000
b. 2,500,000
c. 3,250,000
d. 3,000,000

Problems 15-7 (IAA)


Easy Company reported that the beginning and ending total liabilities
were P840,000 and P1,000,000, respectively.
At year-end, owners’ equity was P2,600,000 and total assets were P200,000
larger than at the beginning of the year.
During the year, the new share capital issued exceeded dividends by
P240,000.
What was the net income or loss for the year?
a. 280,000 income
b. 280,000 loss
c. 200,000 loss
d. 40,000 income
Problems 15-8 (PHILCPA Adapted)
Camadillo Company reported the following charges in the account balances
for the current year, except for retained earnings:
Increase
(Decrease)
Cash 800,000
Accounts receivable, net 250,000
Inventory 1,250,000
Investments ( 500,000)
Accounts payable ( 400,000)
Bonds payable 900,000
Share capital 1,000,000
Share premium 100,000

There are no entries in the retained earnings account except for net
income and a dividend declaration of P300,000 which was paid in the
current year.
What was the net income for the current year?
a. 1,300,000
b. 1,600,000
c. 500,000
d. 200,000

Problems 15-9 (IAA)


Jolo Company reported the following increase (decrease) in the account
balances for the current year:
Cash 1,500,000
Accounts receivable 3,500,000
Inventory 3,900,000
Investments (1,000,000)
Equipment 3,000,000
Accounts payable ( 800,000)
Bonds payable 2,000,000

During the year, the entity sold for cash 100,000 shares with P20 par
for P30 per share. Dividend of P4,500,000 was paid in cash. The entity
borrowed P4,000,000 from the bank and paid off note of P1,000,000 and
interest of P600,000. The entity had no other loan payable.
Interest of P400,000 was payable at the end of year. Interest payable
at the beginning of year was P100,000. Equipment of P2,000,000 was
donated by a shareholder during the year.
What was the net income for the current year?
a. 7,900,000
b. 8,900,000
c. 5,900,000
d. 6,900,000
Problems 15-10 (IAA)
Elaine Company disclosed the following changes in account balances for
current year:
Cash 450,000 increase
Accounts receivable 300,000 decrease
Merchandise inventory 200,000 increase
Accounts payable 100,000 increase
Prepaid expenses 20,000 increase
Accrued expenses 40,000 increase
Unearned rental income 30,000 decrease

In the current year, the owner transferred financial assets to the


business and these were sold for P500,000 to finance the purchase of
merchandise. The owner made withdrawals during the year of P100,000.
What was the net income or net loss for the current year?
a. 360,000 income
b. 360,000 loss
c. 140,000 income
d. 140,000 loss

Problems 15-11 (IAA)


At the beginning of current year, Crispin Santos started a retail
merchandise business. During the current year, the business paid trade
creditors P2,000,000 in cash and suffered a net loss of P350,000.
The ledger preclosing balances at year-end included the following:
Accounts receivable 600,000
Accounts payable 750,000
Capital (total investment in cash) 2,000,000
Expenses (paid in cash) 100,000
Merchandise (unadjusted debit balance) 700,000

There were no withdrawals. All sales and purchases were on credit.


The merchandise account is debited for purchases and credited for sales.
1. What is the amount of purchases for the year?

a. 2,000,000
b. 2,750,000
c. 1,250,000
d. 2,050,000

2. What is the amount of sales for the year?

a. 2,750,000
b. 2,050,000
c. 2,650,000
d. 700,000
3. What is the cash balance at year-end?

a. 1,350,000
b. 2,000,000
c. 1,450,000
d. 3,450,000

4. What is the merchandise inventory at year-end?

a. 700,000
b. 450,000
c. 750,000
d. 0

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