PAS 1 Presentation of FS

Current assets
1. The ledger of RELISH TASTE Co. as of December 31, 20x1 includes the following:
Assets
Cash 20,000
Trade accounts receivable (net of ₱20,000 credit balance in accounts) 80,000
Held for trading securities 160,000
Financial assets designated at FVPL 60,000
Investment in equity securities at FVOCI 140,000
Investment in bonds measured at amortized cost (due in 3 years) 120,000
Prepaid assets 20,000
Deferred tax asset (expected to reverse in 20x2) 24,000
Investment in Associate 72,000
Investment property 92,000
Sinking fund 76,000
Property, plant, and equipment 200,000
Goodwill 56,000
Totals 1,120,000

How much is the total current assets?

a. 380,000 b. 500,000 c. 360,000 d. 384,000

Current liabilities
2. The ledger of CONGRUENT HARMONIOUS Co. as of December 31, 20x1 includes
the following:
Liabilities
Bank overdraft 20,000
Trade accounts payable (net of ₱20,000 debit balance in accounts) 80,000
Notes payable (due in 20 semi-annual payments of ₱8,000) 160,000
Interest payable 60,000
Bonds payable (due on March 31, 20x2) 140,000
Discount on bonds payable (60,000)
Dividends payable 20,000
Share dividends payable 24,000
Deferred tax liability (expected to reverse in 20x2) 72,000
Income tax payable 88,000
Contingent liability 200,000
Reserve for contingencies 56,000
Totals 860,000

How much is the total current liabilities?

a. 384,000 b. 456,000 c. 584,000 d. 364,000
Current and noncurrent liabilities
3. The ledger of COURIER MESSENGER Co. as of December 31, 20x1 includes the
following:
10% Note payable 160,000
12% Note payable 240,000
14% Mortgage note payable 120,000
Interest payable -

Additional information:
 COURIER 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, COURIER 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, COURIER 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 COURIER.
 The 14% mortgage note is due on December 31, 20x9. Per agreement with the
creditor, COURIER is to pay quarterly interests on the note, failure to do so will
render the note payable on demand. COURIER failed to pay the 3rd and 4th
quarterly interests on the note during 20x1.

How much is the total current liabilities?

a. 280,000 b. 310,000 c. 316,000 d. 288,400

Current and noncurrent liabilities

4. The ledger of SQUAMOUS SCALY Co. as of December 31, 20x1 includes the
following:
15% Note payable 100,000
16% Bonds payable 200,000
18% Serial bonds payable 400,000
Interest payable -

Additional information:
 SQUAMOUS Co.’s financial statements were authorized for issue on April 15,
20x2.
 The 15% note payable was issued on January 1, 20x1 and is due on January 1,
20x5. The note pays annual interest every year-end. The agreement with the
lender provides that SQUAMOUS Co. shall maintain an average current ratio of
2:1. If at any time the current ratio falls below the agreement, the note payable
will become due on demand. As of the 3 rd quarter in 20x1, SQUAMOUS’s average
current ratio is 0.50:1. Immediately, SQUAMOUS informed the lender of the
breach of the agreement. On December 31, 20x1, the lender gave SQUAMOUS a
grace period ending on December 31, 20x2 to rectify the deficiency in the
 current ratio. SQUAMOUS promised the creditor to liquidate some of its long-
term investments in 20x2 to increase its current ratio.
 The 16% bonds are 10-year bonds issued on December 31, 1992. The bonds pay
annual interest every year-end.
 The 18% serial bonds are issued at face amount and are due in semi-annual
installments of ₱40,000 every April 1 and September 30. Interests on the bonds
are also due semi-annually. The last installment on the bonds is due on
September 30, 20x7.

How much is the total current liabilities?

a. 218,000 b. 200,000 c. 280,000 d. 298,000

Working capital
5. Below are the account balances prepared by the bookkeeper for REEDY
SLENDER Company as of December 31, 20x1:
Assets Liabilities
Cash 60,000 Accounts payable 80,000
Accounts receivable, net 176,000 Notes payable 400,000
Inventory 160,000
Prepaid income tax 32,000
Prepaid assets 20,000
Investment in subsidiary 40,000
Land held for sale 112,000
Property, plant, and
200,000
equipment
Totals 800,000 480,000

Additional information:
 Cash consists of the following:
Petty cash fund (unreplenished petty cash expenses, ₱6,000) 8,000
Cash in bank (40,000)
Payroll fund 56,000
Tax fund 28,000
Cash to be contributed to a sinking fund set up for the
retirement of bonds maturing on December 31, 20x3 8,000
Total Cash 60,000

 Checks amounting to ₱122,000 were written to suppliers and recorded on

December 30, 20x1, resulting to a bank overdraft of ₱40,000. The checks were
mailed on January 5, 20x2.

 Accounts receivable consists of the following:

Accounts receivable 160,000
Allowance for uncollectibility ( 20,000)
Credit balance in customers’ accounts ( 12,000)
 Selling price of unsold goods sent on consignment
to FRAIL, Inc. at 120% of cost and excluded from
REEDY’s inventory 48,000
Accounts receivable, net 176,000

 The inventory includes cost of goods amounting to ₱40,000 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 WEAK
Co. amounting to ₱20,000.

 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 ₱8,000 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 ₱24,000 debit balance in suppliers’ accounts. Accounts

payable includes the cost of goods held on consignment from WEAK 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?

a. 430,000 b. 406,000 c. 442,000 d. 426,000

Working capital
6. The ledger of NEOPHYTE BEGINNER Co. as of December 31, 20x1 includes the
following:
Assets
Petty cash fund 28,000
Cash in bank – Banco De Oro 60,000
Cash in bank – Metrobank 20,000
Accounts receivable (including ₱60,000 pledged accounts) 140,000
Accounts receivable – assigned 100,000
Equity in assigned receivables 40,000
Notes receivable (including ₱80,000 notes receivable discounted) 180,000
Notes receivable discounted 80,000
Advances to subsidiary 128,000
Held for trading securities 80,000
Inventory 248,000
Deferred charges 72,000
Cash surrender value 24,000
Bond sinking fund 400,000
Total assets 1,600,000

Liabilities
Accounts payable 160,000
Estimated warranty liability 56,000
Loans payable related to assigned receivables (due in 12 months) 60,000
Accrued expenses 52,000
Bonds payable (due on December 31, 20x2) 400,000
Premium on bonds payable 32,000
Total liabilities 760,000

Additional information:
 Petty cash fund includes IOU’s from employees amounting to ₱8,000. The
remaining balance of ₱20,000 represents bills and coins.
 Cash in bank – Banco de Oro represents the balance per bank statement. As of
December 31, 20x1, deposits in transit amounted to ₱40,000 while outstanding
checks amounted to ₱12,000. Included in the bank statement as of December 31,
20x1 is an NSF check amounting to ₱32,000.
 Cash in bank – Metrobank represents the balance per ledger. As of December 31,
20x1, deposits in transit amounted to ₱8,000 while outstanding checks
amounted to ₱4,000.
 Accounts receivable (unassigned) includes uncollectible past due accounts of
₱16,000 which need to be written-off.
 Also included in accounts receivable (unassigned) is a ₱20,000 receivable from a
customer which was given a special credit term. Under the special credit term,
the customer shall pay the ₱20,000 receivable in equal quarterly installments of
₱2,500. The last payment is due on December 31, 20x3.
 The held for trading securities include the reacquisition cost of NEOPHYTE Co.’s
shares amounting to ₱16,000.
 Inventory includes ₱120,000 goods in transit purchased FOB Destination but
excludes ₱48,000 goods in transit purchased FOB Shipping point.

How much is the working capital?

a. 394,000 b. 420,000 c. 349,000 d. 402,000

Reconstruction of financial statement

Use the following information for the next three questions:
The ledger of NAIÏVE UNAFFECTEDLY SIMPLE Co. in 20x1 includes the following:

Jan. 1, 20x1 Dec. 31, 20x1

Current assets 2,400,000 ?
Noncurrent assets 8,000,000 ?
Current liabilities 1,800,000 2,000,000
Noncurrent liabilities ? 6,000,000

Additional information:
 NAIÏVE’s working capital as of December 31, 20x1 is twice as much as the
working capital as of January 1, 20x1.
 Total equity as of January 1, 20x1 is ₱3,400,000. Profit for the year is ₱4,800,000
while dividends declared amounted to ₱2,000,000. There were no other changes
in equity during the year.

7. How much is the noncurrent liabilities as of January 1, 20x1?

a. 5,000,000 b. 5,200,000 c. 5,300,000 d. 5,400,000

8. How much is the current assets as of December 31, 20x1?

a. 3,200,000 b. 3,400,000 c. 3,600,000 d. 4,200,000

9. How much is the noncurrent assets as of December 31, 20x1?

a. 9,000,000 b. 11,000,000 c. 8,000,000 d. 12,000,000

Reconstruction of financial statements

10. The ledger of LOQUACIOUS TALKATIVE Co. in 20x1 includes the following:
Cash 400,000
Accounts receivable 800,000
Inventory 2,000,000
Accounts payable 600,000
Note payable 200,000

During the audit of LOQUACIOUS’s 20x1 financial statements, the following were
noted by the auditor:
 Cash sales in 20x2 amounting to ₱40,000 were inadvertently included as sales in
20x1. LOQUACIOUS recognized gross profit of ₱12,000 on the sales.
 A collection of an ₱80,000 accounts receivable in 20x2 was recorded as collection
in 20x1. A cash discount of ₱4,000 was given to the customer.
 During January 20x2, a short-term bank loan of ₱100,000 obtained in 20x1 was
paid together with ₱10,000 interest accruing in January 20x2. The payment
transaction in 20x2 was inadvertently included as a 20x1 transaction.

How much is the adjusted working capital as of December 31, 20x1?

a. 2,420,000 b. 2,482,000 c. 2,342,000 d. 2,402,000

Reclassification adjustment
Use the following information for the next two questions:
In 20x1, LUSTROUS BRIGHT Co. disposed of a foreign operation for which a
cumulative translation gain of ₱400,000 is recognized in equity. LUSTROUS Co. is
subject to a 30% tax rate.

11. How much is the net of tax reclassification adjustment to other comprehensive
income in 20x1?
a. 280,000 b. (280,000) c. 120,000 d. (120,000)

12. How much is the gross of tax effect of the reclassification adjustment to profit or
loss in 20x1?
a. 280,000 b. (280,000) c. 400,000 d. (400,000)

Comprehensive income
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 4,000
Increase in revaluation surplus 2,000
Remeasurements of the net defined benefit liability (asset) - loss (400)
Net change in translation of foreign operation (800)
Dividends declared (200)
Stock rights 600

13. How much is the other comprehensive income?

a. 1,600 b. 800 c. 1,200 d. 4,800

14. How much is the total comprehensive income?

a. 4,800 b. 5,200 c. 5,400 d. 4,600

Function of expense
Use the following information for the next two questions:
The following are among the expenses incurred by GYRATE REVOLVE Co. during the
year.
in ‘000s
Interest expense ₱ 48
Cost of inventories sold 1,200
Insurance expense 200
Advertising expense 40
Freight-out 20
Freight-in 8
Loss on sale of equipment 4
Legal and other professional fees 24
Rent expense (one-half occupied by sales department) 16
Sales commission expense 28
Doubtful accounts expense 32
15. How much are the distribution costs or selling expenses?
a. 96 b. 128 c. 232 d. 316
16. How much are the administrative expenses?
a. 316 b. 232 c. 264 d. 361

Gross profit
17. The records of MARAUD PLUNDER Co. showed the following information:
Increase in accounts receivable 200,000
Collections on accounts 1,600,000
Cash sales 240,000
Increase in inventory 80,000
Freight-in 28,000
Freight-out 26,000
Decrease in accounts payable 120,000
Disbursements for purchases 960,000
Purchase discounts 8,000

How much is the gross profit for the year?

a. 1,252,000 b. 1,244,000 c. 1,226,000 d. 1,225,000

Gross profit
18. The records of DEADLOCK STANDSTILL Co. showed the following information:
Accounts receivable, net, Jan. 1, 20x1 80,000
Accounts receivable, net, Dec. 31, 20x1 320,000
Accounts receivable turnover 4:1
Inventory, Jan. 1, 20x1 240,000
Inventory, Dec. 31, 20x1 120,000
Inventory turnover 3:1
How much is the gross profit for the year?
a. 240,000 b. 260,000 c. 280,000 d. 300,000

Cost of sales
19. The records of CANDOR FAIRNESS Co. showed the following information:
Decrease in accounts payable 120,000
Disbursements for purchases 880,000
Increase in raw materials 200,000
Direct labor is 50% of raw materials used in production
Manufacturing overhead is 20% of prime costs
Increase in work-in-process inventory 80,000
Decrease in finished goods inventory 100,000

How much is the cost of goods sold?

a. 1,082,000 b. 1,032,000 c. 1,048,000 d. 1,028,000

Reconstruction of financial statement

20. WLETER TURMOIL Co. reported profit after tax of ₱420,000. WELTER’s income
 tax rate is 30%. Operating expenses for the year were 15% of sales and 25% of
cost of sales. Other expenses were 10% of sales. How much is the sales?
a. 4,000,100 b. 3,900,000 c. 4,100,000 d. 4,000,000

Total comprehensive income

Use the following information for the next two questions:
The records of RESTIVE UNEASY Co. on December 31, 20x1 showed the following
information:
Sales 4,000,000
Sales discounts 40,000
Cost of sales 1,600,000
Distribution costs 192,000
Administrative costs 480,000
Casualty loss on typhoon 80,000
Dividends received from investments in FVPL 48,000
Dividends received from investment in associate 96,000
Share in the profit of an associate 144,000
Dividends declared and paid 56,000
Interest expense 88,000
Unrealized gain on investments in FVPL 60,000
Unrealized gain on investments in FVOCI 76,000
Income tax expense 600,000
Loss on revaluation 52,000
Remeasurements of the net defined benefit liability (asset)
44,000
- gain
Correction of understatement in depreciation in prior year 64,000
Translation adjustment of foreign operation – loss 16,000

21. How much is the other comprehensive income?

a. (24,000) b. 152,000 c. 52,000 d. 127,000

22. How much is the total comprehensive income?

a. 1,224,000 b. 1,242,00 c. 1,448,000 d. 1,424,000

Reconstruction of financial statement

23. PRECLUDE PREVENT Co. has the following information on December 31, 20x1:
 Cost of sales is ₱520,000.
 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?

a. 98,200 b. 104,200 c. 105,200 d. 95,200

Shareholders’ equity
24. The ledger of INDENTATION CUT Co. in 20x1 includes the following:
Share capital 400,000
Share premium 80,000
Retained earnings, appropriated 72,000
Retained earnings, unappropriated 168,000
Revaluation surplus 120,000
Remeasurements of the net defined benefit liability (asset) – gain 60,000
Cumulative net unrealized gain on fair value
changes of investment in FVOCI 92,000
Effective portion of losses on hedging instruments in a
cash flow hedge 40,000
Cumulative translation loss on foreign operation 20,000
Treasury shares, at cost 52,000

How much is the total shareholders’ equity?

a. 880,000 b. 932,000 c. 960,000 d. 696,000

Reconstruction of financial statements

Use the following information for the next two questions:
INFRINGE VIOLATE Co. was incorporated on January 1, 20x1. The following were
the transactions during the year:
 Total consideration from share issuances amounted to ₱4,000,000.
 A land and building were acquired through a lump sum payment of ₱800,000. A
mortgage amounting to ₱200,000 was assumed on the land and building.
 Total payments of ₱160,000 were made during the year on the mortgage
assumed on the land and building. The payments are inclusive of interest
amounting to ₱20,000.
 Additional capital of ₱400,000 was obtained through bank loans. None of the
bank loans were paid during the year. Half of the bank loans required a
secondary mortgage on the land and building.
 There is no accrued interest as of year-end.
 Dividends declared during the year but remained unpaid amounted to ₱120,000.
 No other transactions during the year affected liabilities.
 Retained earnings as of December 31, 20x1 is ₱240,000.

25. How much is the profit for the year?

a. 420,000 b. 360,000 c. 280,000 d. 320,000

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

a. 4,802,000 b. 4,940,000 c. 4,780,000 d. 4,820,000
Reconstruction of financial statements
27. GENTEEL POLITE Co. had the following information for 20x1:
Accounts receivable turnover 10:1
Total assets turnover 2:1
Average receivables during the year ₱800,000
Total assets, January 1, 20x1 1,600,000
How much is the total assets as of December 31, 20x1?
a. 6,480,000 b. 6,380,000 c. 6,240,000 d. 6,400,000