FINANCIAL ACCOUNTING AND REPORTING 01:

THE FINANCIAL STATEMENTS PRESENTATION

PROBLEM 1:

You were prepared the Statement of Financial Position of Kalamansi, Inc. for
December 31, 2018 as follows:

Upon inquiry you learn the following additional facts;

1. Current assets include Cash, P184,920 which included P101,920 earmarked for
the purchase of various equipment expected to take place within the next three
months; Merchandise Inventory at cost amounting to P75,125 (the inventories
were set to have an estimated selling price of P90,000 after an estimated cost to
sell at 20% of the sales price); Note receivable- non-trade (13%, due June 1,
2020), P100,000; and, Investment (held for control). P215,000.

2. Investments and funds include prepaid insurance (applicable to the first six
months of 2019), P12,000.

3. Property, plant, and equipment includes land, P167,000; land held for
undetermined future use, P146,000; Building P375,000; and furniture and
fixtures, P114,600.

4. Intangible assets include accounts receivable of P84,480 less an allowance for

doubtful accounts of P4,125.

5. Other assets consist of Machinery held for disposal as per a Board resolution
number 112, P98,000.
6. Current liabilities include accounts payable P23,595; interest payable, P8,405;
and a note payable-bank (12% due May 1, 2020), P130,000.

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 7. Long-term liabilities include serial 10% debenture bonds, P500,000 (P50,000
installments are payable annually from April 1, 2019, through April 1, 2024);
advances pertain to goods that Kalamansi Inc. will ship in 2019) P12,000; and
retained earnings appropriated for bond treatment, P50,000.

8. Shareholders’ equity consists of (P10 ordinary shares par, 5,000 shares

authorized, 4,000 shares issued and outstanding); Paid-in capital in excess of
par, P430,000; Unappropriated retained earnings, P295,000; and, Reserve for
depreciation – building, P45,000 and Reserve for depreciation, furniture and
fixtures, P34,600.

Required: Answer the following:

1. How much is the correct current assets as of December 31, 2018?

a. 247,355 b. 250,480 c. 335,880 d. 348,480

2. What is the total Property, plant and equipment to be presented in the

December 31, 2018 statement of financial position?
a. 577,000 b. 655,000 c. 724,000 d. 822,000

3. What is the correct current liabilities as of December 31, 2018?

a. 82,000 b. 85,595 c. 94,000 d. 224,000

4. What is the total Retained earnings as of December 31, 2018?

a. 291,875 b. 295,000 c. 341,875 d. 345,000

5. What is the total Stockholder’s equity as of December 31, 2018?

a. 815,000 b. 811,875 c. 765,000 d. 761,875

PROBLEM 2:

The adjusted trial balance of BTS Company includes the following accounts at
December 31, 2021:

Sales revenue P 8,000,000

Sales returns 500,000
Commission income 30,000
Interest expense 180,000
Inventory, December 31, 2021 ?
Purchases 5,500,000
Sales salaries and commissions 350,000
Administrative staff costs 650,000
Office supplies expense 120,000
Dividends declared 800,000
Dividend income 20,000
Loss on sale of equipment 40,000
Rent expense 250,000

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 Gain on sale of machinery 50,000
Net unrealized gain on FVOCI 90,000
Depreciation expense- Store Equipment 60,000
Depreciation expense- Office Equipment 70,000
Freight-out 130,000
Freight-in 400,000

Additional information:

1. Inventory, January 1, 2021, P 750,000

2. Gross profit rate is 25% of net sales revenue
3. Rent expense is allocated 55% to selling and 45% to administrative
4. Ignore income tax

Compute the following:

A B C D
1. Distribution cost 677,500 540,000 410,000 547,500
2. Income from operations 305,000 125,000 165,000 345,000
3. Total Comprehensive Income 125,000 215,000 35,000 395,000

PROBLEM 3:

Ortiz Co. had the following account balances:

Sales revenue P 120,000

Cost of goods sold 60,000
Salaries and wages expense 10,000
Depreciation expense 20,000
Dividend revenue 4,000
Utilities expense 8,000
Rent revenue 25,000
Interest expense 12,000
Sales returns 11,000
Advertising expense 13,000
What amount would Ortiz report as other income in its profit or loss statement?
a. P29,000
b. P17,000
c. P25,000
d. P13,000

PROBLEM 4:

Ortiz Co. had the following account balances:

Sales revenue P 180,000
Cost of goods sold 90,000
Salaries and wages expense 15,000
Depreciation expense 30,000
Dividend revenue 6,000

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 Utilities expense 12,000
Rent revenue 30,000
Interest expense 18,000
Sales returns 16,500
Advertising expense 19,500
What amount would Ortiz report as income from operations in its profit or loss
statement?
a. P73,500
b. P45,000
c. P33,000
d. P15,000

PROBLEM 5:

An entity presented the following comparative financial information:

2021 2020

Property, plant and equipment 2,190,000 1,440,000

Accumulated depreciation 450,000 270,000
Long-term investments 225,000 -
Prepaid expenses 351,000 315,000
Merchandise inventory 1,950,000 1,260,000
Accounts receivable, net of 1,560,000 1,080,000
allowance
Cash 690,000 640,000
Share capital-ordinary 3,000,000 2,400,000
Retained earnings 906,000 688,000
Long-term note payable 1,275,000 1,095,000
Accounts payable 309,000 282,000
Dividend payable 201,000 -
Accrued expenses 825,000 -

2021 2020

Net credit sales 7,020,000 3,753,000

Cost of goods sold (3,915,000) (1,881,000)
Gross profit 3,105,000 1,872,000
Expenses, including income tax (2,586,000) (1,374,000)
Net income 519,000 498,000

Accounts receivable and accounts payable relate to merchandise for sale in the normal
course of business. The allowance for bad debts was the same at the end of 2021 and
2020 and no receivables were charged against the allowance.

Accounts payable are recorded net of any discount and are always paid within the
discount period.

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 The proceeds from the note payable were used to finance the acquisition of property,
plant and equipment. Ordinary shares were sold to provide additional working capital.

1. What amount should be reported as net cash provided by operating activities in 2021?
a. 345,000
b. 165,000
c. 546,000
d. 510,000

2. What amount should be reported as net cash used in investing activities in 2021?
a. 750,000
b. 225,000
c. 975,000
d. 750,000

3. What amount should be reported as net cash provided by financing activities in 2021?
a. 600,000
b. 780,000
c. 750,000
d. 680,000

PROBLEM 6:

You were given the following information in relation to COVIDUVIDAPDAP, Inc. as

at December 31, 2021:

ASS
ETS
Cash and cash equivalents 325,000+75,000=400,000
Accounts receivable 275,000+100,000=375,000
Marketable securities, at FMV as of 12/31/21 955,000-600,000=355,000
Prepayments 50,000
Land 900,000
Building 600,000-50,000=550,000(net)
Machinery and equipment 330,000-110,000=220,000(net)
TOTAL 3,435,000~~~~2,850,000
LIABILITIES AND CAPITAL
Current liabilities 325,000+75,000+100,000+3,000-50,000-
100,000=353,000
Non-current liabilities 250,000+50,000=300,000
Ordinary shares, P25 par, 50,000 shares issued 1,250,000
Share premium 750,000
Reserve for depreciation – Building 50,000
Reserve for depreciation – Machinery and 110,000
equipment
Reserve for self-insurance (appropriated RE) 75,000
Accumulated profits 625,000
TOTAL 3,435,000

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 Additional Information:
a. Cash and cash equivalents includes bank overdraft amounting to P75,000.

b. Accounts receivable is net of a 6-months, 12% P100,000 loans payable due

on March 31, 2022 to which a P150,000 receivables were assigned. Interest
is yet to be accrued on the loan.

c. Marketable securities include 10,000 COVIDUVIDAPDAP shares acquired by

the company at P50 per share. COVIDUVIDAPDAP, Inc. shares were currently
selling at P60 per share as of December 31, 2021. Increase in the securities’
value were charged to current operations.

d. Current liabilities include a P50,000, deferred tax liabilities on temporary non-

taxable item expected to reverse in 2022.

e. Current liabilities also include a 10% share dividends payable amounting to

P100,000 (charged to accumulated profits) declared on December 31, 2021
to stockholders as of the same date distributable on February 1, 2022.

f. On December 30, 2021, the board also approved the retirement of half of its
reacquired shares.

g. The company’s board of directors approved a plan to “self-insure” for

probable fire losses because of its previous safety record and to avoid high
insurance premiums. The company debited insurance expense and credited
reserve for self-insurance account for P75,000, the average annual premium
on applicable insurance policy.

h. The company incorporated on January 1, 2021 and was authorized to issue

100,000 ordinary shares at P25 par value. 50,000 of these shares immediately
issued.

Determine the following balances:

A B C D
1. Current assets 1,280,000 1,180,000 1,130,000 1,030,000
2. Total Assets 2,850,000 2,800,000 2,500,000 1,990,000
3. Current liabilities 350,000 353,000 450,000 453,000
4. Noncurrent liabilities 50,000 250,000 300,000 653,000
5. Total stockholders’ equity 2,197,000 2,200,000 2,397,000 2,497,000

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PROBLEM 7:

The following trial balance of an entity on December 31, 2020 has been adjusted
except for income tax expense.
Cash 6,000,000
Accounts receivable 14,000,000
Inventory 10,000,000
Property, plant and equipment 25,000,000
Accounts payable 9,000,000
Income tax payable 6,000,000
Preference share capital 3,000,000
Ordinary share capital 15,000,000
Share premium 4,000,000
Retained earnings – January 1 9,000,000
Net sales and other revenue 80,000,000
Cost of goods sold 48,000,000
Expenses 12,000,000
Income tax expense 11,000,000 __________
126,000,000 126,000,000

During the year, estimated tax payments of P5,000,000 were charged to income tax
expense. The tax rate is 30% on all types of revenue. Inventory and accounts payable
included goods purchased in transit, FOB destination, costing P500,000, and unsold
goods held on consignment at year-end, costing P300,000. The perpetual system is
used. The preference share capital is redeemable mandatorily on December 31, 2021.

1. What amount should be reported as current assets on December 31, 2020?

a. 29,200,000
b. 29,700,000
c. 29,500,000
d. 30,000,000

2. What amount should be reported as current liabilities on December 31, 2020?

a. 14,200,000
b. 17,200,000
c. 12,200,000
d. 9,200,000

3. What is the net income for 2020?

a. 20,000,000
b. 14,000,000
c. 23,000,000
d. 9,000,000

4. What amount should be reported as total shareholders’ equity on December 31,

2020?
a. 40,000,000
b. 37,000,000
c. 45,000,000
d. 42,000,000

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PROBLEM 8:

An entity reported the following data for the current year:

Net sales 9,500,000

Cost of goods sold 4,000,000
Selling expenses 1,000,000
Administrative expenses 1,200,000
Interest expense 700,000
Gain from expropriation of land 500,000
Income tax 800,000
Income from discontinued operations 600,000
Unrealized gain on equity investment at FVOCI 900,000
Unrealized loss on futures contract designated as a cash flow hedge 400,000
Increase in projected benefit obligation due to actuarial assumptions 300,000
Foreign translation adjustment – debit 100,000
Revaluation surplus 2,500,000

1. What amount should be reported as income from continuing operations?

a. 3,100,000
b. 2,300,000
c. 1,800,000
d. 2,900,000

2. What net amount should be recognized in other comprehensive income for the year?
a. 2,600,000
b. 3,100,000
c. 3,400,000
d. 800,000

3. What net amount in OCI should be presented as “may not be recycled to profit or
loss?
a. 3,400,000
b. 2,700,000
c. 3,700,000
d. 3,100,000

4. What amount should be reported as net income?

a. 2,900,000
b. 2,300,000
c. 3,100,000
d. 2,400,000

5. What amount should be reported as comprehensive income?

a. 5,500,000
b. 2,900,000
c. 2,600,000
d. 6,100,000

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PROBLEM 9:

Raven Corporation presented the following information in line with your audit of its
financial statements for the period ended December 31, 2021:

2021 2020
Debit Credit Debit Credit
Cash and cash equivalents 2,664,000 600,000
Investment in trading securities 120,000 480,000
Accounts receivable 1,776,000 1,200,000
Allowance for bad debts 96,000 60,000
Inventories 3,492,000 3,600,000
Prepaid insurance 30,000 24,000
Land and building 2,340,000 2,340,000
Accumulated depreciation - building 315,000 270,000
Equipment 3,732,000 2,040,000
Accumulated depreciation - equipment 549,000 330,000
Accounts payable 660,000 720,000
Notes payable - current 840,000 240,000
Accrued expenses 216,000 104,400
Income tax payable 420,000 120,000
Unearned revenue 12,000 108,000
Notes payable - noncurrent 480,000 720,000
Bonds payable 3,000,000 3,000,000
Discount on bonds payable 102,000 108,000
Deferred tax liability 564,000 639,600
Ordinary shares, P10 par 4,312,800 2,400,000
Share premium 1,392,000 60,000
Accumulated profits-appropriated for 60,000 120,000
treasury
Accumulated profits – appropriated for 456,000 276,000
expansion
Accumulated profits - unappropriated 415,200 1,344,000
Treasury shares 60,000 120,000
Sales 10,776,000
Cost of goods sold 6,468,000
Gain on sale of trading securities 144,000
Selling and administrative expenses 3,444,000
Income taxes 420,000
Unrealized holding loss on trading securities 48,000
Loss on sale of equipment 12,000
Totals 24,708,000 24,708,000 10,512,000 10,512,000

Additional Information:
a. All sales and purchases were made on account.

b. Equipment with an original cost of P180,000 was sold for P84,000.

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 c. Selling and administrative expenses included: Building depreciation,
P45,000; Equipment depreciation, P303,000; Bad debt expense, P36,000;
and, Interest expense, P216,000.

d. A one-year note payable for P600,000 was issued to purchase a new

equipment during the year.

e. The non-current note payable is serially due at P240,000 every year plus
interest until paid.

f. Treasury shares were sold for P12,000 more that their original cost.

g. During the year, a 30% stock dividends was declared and issued. At that
time, there were 240,000, of P10 par ordinary shares outstanding. However,
2,400 of these shares were held in the treasury. Market value of ordinary
shares was P50 per share when the share dividends were declared.

h. Equipment was overhauled at a cost of P72,000. The overhaul enhanced the

capacity of the equipment thus was capitalized and charged to the
Equipment account.

i. The only other transaction affecting the company’s accumulated profits

accounts was the declaration and payment of cash dividends during the
year.

Requirements:
1. What is the net income for the year?
a. 540,000 b. 603,900 c. 522,000 d. 528,000
2. How much is the cash dividends declared and paid during the year?
a. 96,000 b. 624,000 c. 88,800 d. none
3. How much was the proceeds from share issuance during the year?
a. 1,200,000 b. 1,320,000 c. 2,520,000 d. 3,232,800
4. How much was the proceeds from sale of trading securities?
a. 312,000 b. 456,000 c. 504,000 d. 168,000
5. What is the carrying value of the equipment sold in letter b?
a. 84,000 b. 180,000 c. 96,000 d. 108,000
6. What is the total cash payment made for the purchase of equipment?
a. 600,000 b. 1,272,000 c. 1,800,000 d. 1,200,000
7. How much was the proceeds from sale of treasury shares?
a. 72,000 b. 60,000 c. 48,000 d. 120,000
8. How much was the net cash provided by operating activities?
a. 540,000 b. 1,044,000 c. 996,000 d. 1,071,600
9. How much was the net cash used in investing activities?
a. 1,272,000 b. 1,188,000 c. 732,000 d. 1,116,000
10. How much was the net cash provided by financing activities?
a. 2,256,000 b. 2,244,000 c. 2,184,000 d. 1,272,000

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