CHAPTER 3 THE STATEMENT OF FINANCIAL POSITION AND NOTES TO THE FINANCIAL FINA NCIAL STATEMEN TS Discussion Question 15 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14.
C 15. B C 16. B B 17. E E 18. A A 19. B B 20. F E 21. E A 22. B D 23. E E 24. A C 25. F B 26. B A 27. D F (shown on the face of the statement of changes in equity)
3-1.
(GARNET COMPANY) Garnet Company Statement of Financial Position December 31, 2012 Assets Current assets Cash and cash equivalents Trading securities Trade and other receivables Inventory Non-current assets Property, plant and equipment Investment property Investments in associates Intangibles TOTAL ASSETS
Note P (5)
(6)
35,000 61,000 107,000 322,000
P1,483,000 1,000,000 250,000 141,000
(7)
P 525,000
2,874,000 P3,399,000
Liabilities and Shareholders’ Equity Current liabilities Trade and other payables (8) Income tax payable Noncurrent liabilities Bonds payable (9) Deferred tax liability Shareholders’ equity Share capital (10) Additional paid in capital cap ital (11) Retained earnings (12) TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
8
P 336,000 150,000
P 486,000
701,000 50,000
751,000
P 1,534,000 321,000 307,000
2,162,000 P3,399,000
Chapter 3 – The Statement of Financial Position and Notes to the Financial Statements Note 5 – Trade and other receivables Accounts receivable Less allowance for bad debts Net trade and other receivables
P115,000 8,000 P107,000
Note 6 – Property, plant and equipment Land Buildings Less accumulated depreciation Equipment Less accumulated depreciation Total property, plant and equipment
P 300,000 P1,440,000 530,000 P 624,000 351,000
Note 7 – Intangibles Patents Less accumulated amortization Trademarks Less accumulated amortization Total
P120,000 22,000 P 60,000 17,000
Note 8 – Trade and other payables Accounts payable Salaries payable Withholding taxes payable Total
910,000 273,000 P1,483,000
P 98,000 43,000 P141,000
P236,000 20,000 80,000 P336,000
Note 9 – Bonds payable Bonds payable (due 2014) Less discount on bonds payable Total
P 770,000 69,000 P701,000
Note 10 – Share capital Preference share capital, P100 par Ordinary share capital, P10 par Share dividends distributable Total
P 210,000 1,300,000 24,000 P1,534,000
Note 11 – Additional paid-in capital Share premium -preference Share premium -ordinary Total
P 81,000 240,000 P321,000
Note 12 – Retained earnings Appropriated Unappropriated Total retained earnings
P 45,000 262,000 P307,000
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Chapter 3 – The Statement of Financial Position and Notes to the Financial Statements 3-2.
(RUBY CORPORATION) Ruby Corporation Statement of Financial Position December 31, 2012 Assets Current assets Cash and cash equivalents Financial assets held for trading (Note 5) Trade and other receivables (Note 6) Inventories (Note 7) Prepaid expenses Non-current assets held for sale (Note 8) Non-current assets Property, plant and equipment (Note 9) Other financial assets (Note 10) Intangible assets (Note 11) TOTAL ASSETS
P 116,000 160,000 308,000 985,000 31,000 210,000 P3,248,000 339,000 182,000
P1,810,000
3,769,000 P5,579,000
Liabilities and Shareholders’ Equity Current liabilities Trade and other payables Income tax payable Unearned revenues Provision for product warranty Noncurrent liabilities Bonds payable (Note 12) Shareholders’ equity Share capital (Note 13) Additional paid in capital (Note 14) Retained earnings TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
P 580,000 247,000 62,000 73,000
P 962,000 848,000
P2,028,000 537,000 1,204,000
3,769,000 P5,579,000
Note 5 – Financial assets held for trading Financial assets held for trading, costing P150,000, are reported at market values. Note 6 – Trade and other receivables Accounts receivable Less Allowance for bad debts Net trade receivables
P323,000 15,000 P308,000
Note 7 – Inventories (at lower of cost and NRV) Finished goods Goods in process Raw materials Total
P416,000 347,000 222,000 P985,000
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Chapter 3 – The Statement of Financial Position and Notes to the Financial Statements Note 8 – Non-current assets held for sale This classification represents a unit of machinery with carrying amount of P240,000 and fair value less cost to sell of P210,000. The sale is expected to be consummated in May 2013. Note 9 – Property, plant and equipment Land Land held for future use* Buildings Less accumulated depreciation Machinery Less accumulated depreciation Equipment Less accumulated depreciation Total
P1,320,000 195,000 P1,824,000 622,000 P 319,000 106,000 P 530,000 212,000
1,202,000 213,000 318,000 P3,248,000
Land held for future use, which conventionally was classified as long-term investment, is not qualified to be reported as Investment Property under par. 9 of IAS 40. Thus, property held for future development and subsequent use as owner-occupied property is part of property, plant and equipment. Note 10 – Other financial assets Investment in XYZ bonds, at amortized cost Cash surrender value of life insurance Total
P250,000 89,000 P339,000
Note 11 – Intangible assets Patents Less Accumulated amortization Total
P200,000 18,000 P182,000
Note 12 – Bonds payable Bonds payable Add Premium on bonds payable Total
P800,000 48,000 P848,000
Note 13 – Share Capital Preference share capital Ordinary share capital Total
P 400,000 1,628,000 P2,028,000
Note 14 – Additional paid in capital Share premium - preference Share premium - ordinary Total
P234,000 303,000 P537,000
Retained earnings is adjusted by a decrease of P30,000 representing loss from measurement to fair value less cost to sell of asset held for sale, thus retained earnings balance is P1,204,000.
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Chapter 3 – The Statement of Financial Position and Notes to the Financial Statements 3-3.
(DIAMOND COMPANY) Diamond Company Statement of Financial Position December 31, 2012 Assets Current assets Cash Financial assets at fair value through profit or loss Trade and other receivables (Note 5) Inventory Prepaid expenses (Note 6) Noncurrent assets Property, plant and equipment (Note 7) Financial assets at fair value through OCI Intangible assets Deferred tax asset TOTAL ASSETS
P 230,000 320,000 510,000 600,000 130,000 P3,450,000 1,030,000 470,000 70,000
P1,790,000
5,020,000 P6,810,000
Liabilities and Shareholders’ Equity Current liabilities Trade and other payables (Note 8) Unearned rent Noncurrent liabilities Bonds payable (Note 9) Shareholders’ equity Ordinary share capital, P10 par Share Premium Retained earnings Total Treasury shares, at cost Accumulated holding gains (losses) – investments through other comprehensive income TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
P1,390,000 90,000
P1,480,000 1,000,000
P1,200,000 1,040,000 2,300,000 4,540,000 (330,000) 120,000 P6,810,000
Note 5 – Trade receivables Accounts receivable Less Allowance for uncollectible accounts Net trade receivables
P590,000 80,000 P510,000
Note 6 – Prepaid expenses Office supplies Prepaid insurance Total
P 80,000 50,000 P130,000
Note 7 – Property, plant and equipment Land Buildings and equipment Less accumulated depreciation Total
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P 810,000 P3,560,000 920,000
2,640,000 P3,450,000
Chapter 3 – The Statement of Financial Position and Notes to the Financial Statements
3-4.
Note 8 – Trade and other payables Accounts payable Salaries payable Taxes payable Total
P 990,000 150,000 250,000 P1,390,000
Note 9 – Bonds payable Bonds payable Less discount on bonds payable Net
P1,100,000 100,000 P1,000,000
(EMERALD COMPANY) Emerald Company Statement of Financial Position December 31, 2012 Assets Current assets Cash Trading securities Trade and other receivables Inventories Prepaid expenses Non-current asset held for sale Noncurrent assets Property, plant and equipment Investment property Other financial assets Intangibles TOTAL ASSETS
Note
(7)
P 380,000 485,000 2,780,000 450,000 290,000 1,200,000
(8) (9) (10) (11)
P 5,600,000 2,900,000 1,600,000 960,000
(5) (6)
P 5,585,000
11,060,000 P16,645,000
Liabilities and Shareholders’ Equity Current liabilities Trade and other payables (12) Income taxes payable Provision for warranties Noncurrent liabilities Notes payable (13) Bonds payable (14) Mortgage payable Total Liabilities Shareholders’ equity Share capital (15) Share premium Retained earnings Total Treasury shares, at cost TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY Retained earnings before adjustment Unrealized gain on trading securities Retained earnings after recognition of gain
13
P 1,750,000 720,000 200,000 1,000,000 P 4,430,000 1,600,000
P 1,700,000 1,820,000 3,605,000 P 7,125,000 (180,000)
P 2,670,000
7,030,000 P 9,700,000
6,945,000 P16,645,000 P3,580,000 25,000 P3,605,000
Chapter 3 – The Statement of Financial Position and Notes to the Financial Statements Note 5 – Trading securities The trading securities, costing P460,000, are reported at market value. Note 6 – Trade and other receivables Accounts receivable Notes receivable (due July 1, 2013) Allowance for uncollectible accounts Net trade and other receivables
P1,850,000 1,000,000 (70,000) P2,780,000
Note 7 – Noncurrent asset held for sale The non-current asset held for sale represents land that is available for immediate sale and its carrying amount will be recovered through a sale transaction. The sale is highly probable as the plan for its sale has already been completed at yearend. Its fair value less cost to sell at December 31, 2012 was P1,400,000. Note 8 – Property, plant and equipment Land Buildings Less accumulated depreciation Equipment Less accumulated depreciation Total Note 9 – Investment property Land Building Accumulated depreciation Total
P1,400,000 P4,340,000 1,800,000 P2,960,000 1,300,000
2,540,000 1,660,000 P5,600,000 P1,200,000
P2,000,000 (300,000)
Note 9 – Other financial assets Investment in Day Corporation bonds (market, P906,000) Sinking fund for bond retirement Total Note 10 – Intangibles Patents Less accumulated amortization Trademarks Less accumulated amortization Total
P 900,000 700,000 P1,600,000 P820,000 230,000 P520,000 150,000
Note 11 – Trade and other payables Accounts payable Wages payable Current portion of mortgage payable Total
1,700,000 P2,900,000
P 590,000 370,000 P 960,000 P 940,000 410,000 400,000 P1,750,000
Note 12 – Notes payable The notes payable was issued on June 30, 2011 and matures on June 30, 2013. As of December 31, 2012, the company has negotiated with the lender to extend the maturity date to June 30, 2014. Note 13 – Bonds payable Bonds payable Add premium on bonds payable Total
P4,000,000 430,000 P4,430,000
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Chapter 3 – The Statement of Financial Position and Notes to the Financial Statements Note 14 – Share capital Preference share capital Ordinary share capital Total 3-5.
3-6.
P 600,000 1,100,000 P1,700,000
(SAPPHIRE COMPANY) Current assets consist of Cash (1,240,000 – 500,000) Securities held for trading 900,000 + 500,000+ (500,000 x 4.8% x 105/360) Trade accounts receivable (net of P60,000 allowance for bad debts) 1,220,000 + 50,000 – 60,000 Notes receivable Creditor’s account with debit balance Merchandise inventory Total current assets
1,210,000 920,000 100,000 1,360,000 P 5,737,000
Current liabilities consist of Trade accounts payable (750,000 + 150,000 + 100,000) Customer deposit Notes payable (1,500,000 – 300,000) Current portion of bonds payable Accrued interest on bonds payable (2.5M x .10 x 6/12) Income taxes payable Employees income tax withheld Total current liabilities
1,000,000 50,000 1,200,000 500,000 125,000 280,000 40,000 P 3,195,000
P 740,000 1,407,000
(TURQUOISE COMPANY) Current liabilities consist of Accounts payable Mortgage notes payable Bank notes payable Interest payable VAT payable (2,688,000/1.12) x .12 Withholding tax payable Income taxes payable (186,500 – 70,000) Provision for damages Total current liabilities
P 270,000 1,300,000 100,000 7,500 288,000 120,000 116,500 650,000 P2,852,000
Note: The entire amount of mortgage notes payable is classified as current liabilities because as of December 31, 2012, the company has no discretion yet to refinance the obligation on a long-term basis. The refinancing of the mortgage payable in 2013 is nonadjusting event that requires disclosure in the notes to the financial statements. 3-7.
(OPAL COMPANY) Current assets consists of Cash (400,000 + 20,000 - 30,000 + 25,000 + 540,000) Accounts receivable (net) 800,000 + 30,000 – 150,000 Inventories (1,200,000 – 40,000) Prepaid insurance (250,000 – 50,000) Total current assets at December 31, 2010
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P 955,000 680,000 1,160,000 200,000 P2,995,000
Chapter 3 – The Statement of Financial Position and Notes to the Financial Statements OR Reported total current assets Bank overdraft Cash for purchase of plant site Unreplenished petty cash expenses Total current assets at December 31, 2010 3-8.
P4,580,000 20,000 (1,500,000) (15,000) P2,995,000
(AQUAMARINE COMPANY)
Reported totals (a) Sinking fund cash (b) Treasury shares (c) Cash fund for taxes (d) Advances and commissions payable (e) Provision for damages Correct totals
Current assets P3,500,000
Non-current assets P8,000,000 380,000 (500,000)
Current liabilities P2,400,000
140,000
140,000
210,000
210,000 168,000* P2,918,000
P3,850,000
P7,880,000
Non-current liabilities P2,700,000 380,000
P3,080,000
*Alternatively, if the amount of P180,000 was already included in the current liabilities total of P2,400,000, an adjustment deducting P12,000 from current liabilities is appropriate in order to bring the provision for damages to the correct amount of P168,000. 3-9.
(PERIDOT COMPANY)
Reported amounts (a) Post dated check recorded (b) Increase in market value (c) Goods shipped FOB destination (d) Goods out on consignment Correct balances, December 31, 2012
Cash P536,000 80,000
Trading securities P500,000
Accounts receivable P3,285,000
Inventory P3,500,000
50,000 (180,000) P616,000
P550,000
P3,105,000
120,000 135,000 P3,755,000
3-10. (ZIRCON COMPANY) Current assets: Accounts receivable (net)=148,000 – 12,000 Citibank current account Inventories Office supplies Total current assets Current liabilities: Accounts payable Income tax payable Advances from suppliers Accrued interest on bonds payable Provision for warranties Working capital
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P136,000 98,000 217,500 3,500 P455,000 P124,000 16,000 150,000 17,000 60,000
367,000 P 88,000
Chapter 3 – The Statement of Financial Position and Notes to the Financial Statements 3-11. 1. 2. 3. 4.
C A C A
5. 6. 7. 8.
B C A A
9. 10.
A B
MC. 21 MC 22 MC 23 MC 24 MC 25
D C C A B
MULTIPLE CHOICE QUESTIONS MC1 MC2 MC3 MC4 MC5 MC6 MC7 MC8 MC9 MC10
D A A A A C D D C C
MC26 MC27 MC28 MC29 MC30
A B B D C
MC31
B
MC32 MC33 MC34 MC35 MC36 MC37 MC39
B C A A A C A
MC40 MC38 MC41 MC42 MC43
B D D A C
MC44 MC45
B C
MC46 MC47 MC48 MC49 MC50 MC51 MC52
B B C B A C B
MC11 MC12 MC13 MC14 MC15 MC16 MC17 MC18 MC19 MC20
B D C D B C D A C C
(200,000-50,000) + 120,000 + 79,000 + (280,000– 60,000) – 1,000=569,000 3,740,000 + 50,000 – 4,000 + 100,000 – 180,000 + 50,000 = 3,756,000 2,680,000 + 50,000 + 100,000 +50,000 – 1,000,000 = 1,880,000 4,014,000 – 9,000 - 150,000 = 3,855,000 (124,000 + 13,000) + 90,000 + 92,000 + (122,000 + 7,000 – 6,000) + 136,000 + 12,000 = 590,000 13,000 + (75,000 + 12,000 + 15,000) + 7,000 + (150,000 – 30,000) + 4,000 + (250,000/5) + 28,000 = 324,000 (1,125,000+65,000) + 136,000 + 96,000 + 150,000 + (750,000/5)=1,722,000 376,000 + (2,000,000+100,000 – 8,000) = 2,468,000 360,000 + 480,000 – 30,000 – 12,000 + 90,000 + 120,000 = 1,008,000 450,000 + 750,000 – 90,000 + 240,000 = 1,350,000 2,160,000 – 250,000 + 224,000 + 830,000 + 970,000 = 3,934,000 980,000 + 108,000 + 720,000 = 1,808,000 (490,000 – 25,000) + (380,000 – 200,000) + (1,250,000 – 500,000) + 100,000 + 900,000 + 80,000 = 2,475,000 25,000 + 200,000 + 500,000 + 200,000 + 3,750,000 = 4,675,000 160,000 + 50,000 + 110,000 + 300,000 + 10,000 = 630,000 675,000 + (2,695,000 – 500,000) + 2,185,000 = 5,055,000 1,801,000 + (654,000 – 475,000) = 1,980,000 13,360,000 – 11,180,000 – 654,000 = 1,526,000; 1,526,000 + 3,350,000 = 4,876,000 (1,200,000 – 200,000) + 1,500,000 + 25,000 = 2,525,000 500,000 + 550,000 – 250,000 = 800,000 + 1,000,000 + 250,000 + 450,000 = 2,500,000 150,000 + (2,100,000 – 500,000 – 80,000) + (1,600,000 – 200,000)=3,070,000 (550,000 – 95,000) + 800,000 + (800,000 X 12% X 7/12) + 6,500 = 1,317,500 8,700,000 – (4,000,000 – 2,000,000 + 5,000,000 – 1,000,000) =2,700,000 175,000 + 136,000 + 820,000 + 153,000 + 366,000 = 1,650,000 250,000 + 140,000 + 228,000 + 248,000 = 866,000 525,000 – 400,000 + 300,000 + 1,020,000 + 1,200,000 + 450,000=3,095,000 (950,000 x 2.50) + 2,500,000 + (10M x 12% x 3/12) + (12M + 30M – 25M) = 22,175,000
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