CHAPTER 3 THE STATEMENT OF FINANCIAL POSITION AND NOTES TO THE FINANCIAL STATEMENTS Discussion Question 16 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.
C C B E A B E A D E
11 12. 13 14 15 16. 17. 18. 19. 20
C B A F B B E A B F
21. 22. 23. 24. 25. 26. 27.
E B E A F B D
Problems 3-1.
(GARNET COMPANY)
Garnet Company Statement of Financial Position December 31, 2016 Assets
Current assets Cash and cash equivalents Financial assets at FVPL Trade and other receivables Inventory Non-current assets Property, plant and equipment Investment property Investments in associates Intangibles TOTAL ASSETS
Note P (5) (6) (7)
35,000 61,000 107,000 322,000
P1,483,000 1,000,000 250,000 141,000
P 525,000
2,874,000 P3,399,000
Liabilities and Shareholders’ Equity Current liabilities Trade and other payables Income tax payable Noncurrent liabilities Bonds payable Deferred tax liability Shareholders’ equity Share capital Additional paid in capital Accumulated profits TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
8
(8) (9) (10) (11) (12)
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 9 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 Note 7 – Intangibles Patents Less accumulated amortization Trademarks Less accumulated amortization Total
P 300,000 P1,440,000 530,000 P 624,000 351,000
P120,000 22,000 P 60,000 17,000
Note 8 – Trade and other payables Accounts payable Salaries payable Withholding taxes payable Total
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 2018) 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 – Accumulated profits Appropriated Unappropriated Total retained earnings 3-2.
910,000
P 45,000 262,000 P307,000
(RUBY CORPORATION) Ruby Corporation Statement of Financial Position December 31, 2016 Assets Current assets Cash and cash equivalents Financial assets through profit or loss (Note 5) Trade and other receivables (Note 6) Inventories (Note 7) Prepaid expenses Non-current assets held for sale (Note 8)
9
P 116,000 160,000 308,000 985,000 31,000 210,000
P1,810,000
Chapter 3 – The Statement of Financial Position 10 and Notes to the Financial Statements Non-current assets Property, plant and equipment (Note 9) Other financial assets (Note 10) Intangible assets (Note 11) TOTAL ASSETS
P3,248,000 339,000 182,000
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)
P 580,000 247,000 62,000 73,000
P 962,000 848,000
Shareholders’ equity Share capital (Note 13) Share premium (Note 14) Retained earnings TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
P2,028,000 537,000 1,204,000
3,769,000 P5,579,000
Note 5 – Financial assets through profit or loss Financial assets through profit or loss, 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
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 2015. 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 Debt investments at amortized cost Cash surrender value of life insurance Total
10
P250,000 89,000 P339,000
Chapter 3 – The Statement of Financial Position 11 and Notes to the Financial Statements 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 – Share premium 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. 3-3.
(DIAMOND COMPANY)
Diamond Company Statement of Financial Position December 31, 2016
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)
P1,390,000 90,000
P1,480,000 1,000,000
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
11
P1,200,000 1,040,000 2,300,000 4,540,000 (330,000) 120,000 P6,810,000
Chapter 3 – The Statement of Financial Position 12 and Notes to the Financial Statements 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
3-4.
P 810,000 P3,560,000 920,000
2,640,000 P3,450,000
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 (due 2018) Less discount on bonds payable Net
P1,100,000 100,000 P1,000,000
(EMERALD COMPANY) Emerald Company Statement of Financial Position December 31, 2016 Assets Current assets Cash Equity securities through profit or loss 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 P 380,000 485,000 2,780,000 450,000 290,000 1,200,000
(5) (6) (7) (8) (9) (10) (11)
P 5,600,000 2,900,000 1,600,000 960,000
P 5,585,000
11,060,000 P16,645,000
Liabilities and Shareholders’ Equity Current liabilities Trade and other payables Income taxes payable Provision for warranties Noncurrent liabilities Notes payable Bonds payable Mortgage payable Total Liabilities
(12)
(13) (14)
12
P 1,750,000 720,000 200,000 1,000,000 P 4,430,000 1,600,000
P 2,670,000
7,030,000 P 9,700,000
Chapter 3 – The Statement of Financial Position 13 and Notes to the Financial Statements Shareholders’ equity Share capital (15) Share premium Retained earnings Total Treasury shares, at cost TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
P 1,700,000 1,820,000 3,605,000 P 7,125,000 (180,000)
Retained earnings before adjustment Unrealized gain on equity securities through profit or loss Retained earnings after recognition of gain
6,945,000 P16,645,000 P3,580,000 25,000 P3,605,000
Note 5 – Equity securities through profit or loss The equity securities are intended for immediate trading in the future. The securities cost P460,000 and are reported at fair value. Note 6 – Trade and other receivables Accounts receivable Notes receivable (due July 1, 2017) 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, 2016 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 10 – Other financial assets Investment in Day Corporation bonds (fair value P906,000) Sinking fund for bond retirement Total Note 11 – Intangibles Patents Less accumulated amortization Trademarks Less accumulated amortization Total
P820,000 230,000 P520,000 150,000
Note 12 – Trade and other payables Accounts payable Wages payable Current portion of mortgage payable Total
13
1,700,000 P2,900,000 P 900,000 700,000 P1,600,000
P 590,000 370,000 P 960,000 P 940,000 410,000 400,000 P1,750,000
Chapter 3 – The Statement of Financial Position 14 and Notes to the Financial Statements Note 13 – Notes payable The notes payable was issued on June 30, 2015 and are supposed to mature on June 30, 2017. As of December 31, 2016, the company has negotiated with the lender to extend the maturity date to June 30, 2018.
3-5.
3-6.
Note 13 – Bonds payable Bonds payable Add premium on bonds payable Total
P4,000,000 430,000 P4,430,000
Note 14 – Share capital Preference share capital Ordinary share capital Total
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, 2016, the company has no discretion yet to refinance the obligation on a long-term basis. The refinancing of the mortgage payable in 2017 is nonadjusting event that requires disclosure in the notes to the financial statements.
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Chapter 3 – The Statement of Financial Position 15 and 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, 2016 OR Reported total current assets Bank overdraft Cash for purchase of plant site Unreplenished petty cash expenses Goods held on consignment Cash surrender value of life insurance Total current assets at December 31, 2016
3-8.
(AQUAMARINE COMPANY) Reported totals (a) Sinking fund cash (b) Treasury shares (b) NCA held for sale (c) Cash fund for taxes (d) Advances and commissions payable (e) Provision for damages Correct totals
3-9.
Current assets P3,500,000 3,000,000 140,000
P6,850,000
P4,580,000 20,000 (1,500,000) (15,000) (40,000) (50,000) P2,995,000 Current liabilities P2,400,000
Non-current liabilities P2,700,000 380,000
140,000
210,000 P4,880,000
(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, Dec. 31, 2016
3-10.
Non-current assets P8,000,000 380,000 (500,000) (3,000,000
P 955,000 680,000 1,160,000 200,000 P2,995,000
Cash P536,000 80,000
FA at FVPL P500,000
210,000 (12,000) P2,738,000
Accounts receivable P3,285,000
P3,080,000
Inventory P3,500,000
50,000 (180,000) P616,000
P550,000
P3,105,000
120,000 135,000 P3,755,000
(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 customers 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 16 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
MULTIPLE CHOICE QUESTIONS Theory MC1 MC2 MC3 MC4 MC5 MC6 MC7 MC8 MC9 MC10
C B A A A C C D C C
MC11 MC12 MC13 MC14 MC15 MC16 MC17 MC18 MC19 MC20
B D C D C C C D A C
MC21 MC22 MC23 MC24 MC25 MC26 MC27
D B C D C B C
Problems MC28 MC29 MC30 MC31 MC32 MC33 MC34 MC35 MC36 MC37 MC38 MC39 MC40 MC41
A B B D C B C B A A A C D A
MC42 MC43 MC44 MC45 MC46 MC47 MC48 MC49 MC50 MC51 MC52 MC53 MC54 MC55
A D A C B C B B C B A C B B
(200,000-50,000) + 120,000 + 79,000 + (280,000– 60,000) =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 = 3,855,000 137,000+90,000+92,000+(122,000+7,000–6,000)+136,000+12,000=590,000 13,000+ 102,000+ 7,000 + 120,000 +4,000+50,000+28,000 = 324,000 376,000 + (2,000,000+100,000 – 8,000) = 2,468,000 (1,125,000+65,000) + 136,000 + 96,000 + 150,000 + (750,000/5)=1,722,000 360,000 + 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 = 1,808,000 160,000 + 50,000 + 110,000 + 300,000 + 10,000 = 630,000 (490,000 – 25,000) + (380,000 – 200,000) + (1,250,000 – 500,000) + 100,000 + 900,000 + 80,000 = 2,475,000 25,000 + 500,000 + 200,000 + 3,750,000 = 4,475,000 675,000 + (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 = 2.5M 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) + 2.5M + (10M x 12% x 3/12) + (12M + 30M – 25M) = 22,175,000 AR: 247,000 – 40,000 + (58,000 x 1.25) = 179,500 Invy: 220,000 + (40,000 x 75%) + 22,000 = 272,000 PPE: 3,200,000 – 1,200,000 = 2,000,000
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