MANUEL L.

QUEZON UNIVERSITY School of Accountancy and Business Arts

Integrated Review in Theory of Accounts and Practical Accounting 1 Day 1

STATEMENT OF FINANCIAL POSITION

Share capital 5,000,000.00

Share premium 500,000.00
Retained Earnings 880,000.00
Serial bonds payable (P500,000 due every July 1 of each year) 2,500,000.00
Employees income tax payable 20,000.00
Notes payable 100,000.00
Accrued expenses 30,000.00
Accrued interest on notes payable 10,000.00
Income tax payable 60,000.00
Allowance for doubtful accounts 50,000.00
Advances from customers 100,000.00
Accounts receivable 500,000.00
Accumulated depreciation - building 1,600,000.00
Accumulated depreciation - machinery 1,300,000.00
Investment in bonds 1,500,000.00
Land 1,500,000.00
Machinery 2,000,000.00
Factory supplies 50,000.00
Notes receivable 150,000.00
Building 4,000,000.00
Cash 420,000.00
Claim receivable 20,000.00
Finished goods 400,000.00
Franchise 200,000.00
Goods in process 600,000.00
Prepaid Insurance 20,000.00
Raw materials 200,000.00
Trading securities 250,000.00
Tools 40,000.00
Goodwill 100,000.00
Plant expansion fund 500,000.00
Accounts payable 300,000.00
1. Prepare a properly classified Statement of Financial Position as of December 31, 20XX

Sales 7,500,000.00
Inventories - January 1
Raw Materials 200,000.00
Goods in Process 240,000.00
Finished Goods 360,000.00
Inventories - December 31
Raw Materials 280,000.00
Goods in Process 170,000.00
Finished Goods 300,000.00
Purchases 3,000,000.00
Direct Labor 950,000.00
Indirect Labor 250,000.00
Superintendence 210,000.00
Light, heat and power 320,000.00
MANUEL L. QUEZON UNIVERSITY School of Accountancy and Business Arts
Integrated Review in Theory of Accounts and Practical Accounting 1 Day 1

Rent - factory building 120,000.00

Repairs and maintenance - machinery 50,000.00
Factory supplies used 110,000.00
Sales salaries 400,000.00
Advertising 160,000.00
Depreciation - store equipment 70,000.00
Office Salaries 150,000.00
Depreciation - office equipment 40,000.00
Depreciation - machinery 60,000.00
Salaries returns and allowances 50,000.00
Interest income 10,000.00
Gain on sale of equipment 100,000.00
Delivery expenses 200,000.00
Accounting and legal fees 150,000.00
Office expenses 250,000.00
Earthquake loss 300,000.00
Gain from expropriation of asset 100,000.00
Income tax expense 320,000.00

2. Prepare a Statement of Cost of Goods Sold

3. Prepare a properly classified Income Statement.

4. Included in Levi Corporation’s liability account balances at December 31, 2019, were the
following:
14% note payable issued October 1, 2018, maturing
September 30, 2020 P 1,250,000
16% note payable issued April 1, 2014, due on April 2020 P 2,000,000
On December 31, 2019, the company expects to refinance the P 2,000,000 by the issuance of a
long-term note payable in lump sum. The refinancing of the P 2,000,000 is at the discretion of
the enterprise. Levi’s December 31, 2019 financial statements were issued on March 31, 2020.
On January 15, 2020, the entire P 2,000,000 balance of the 16% note was refinanced by issuance
of a long-term obligation.
On the December 31, 2019 statement of financial position, what amount of the notes payable
should Levi’s classify as short-term obligation?

5. On July 1, 2019, Mark Company acquired machinery worth P 2,500,000 from Julian
Corporation. Terms of the contract calls for a down-payment of P 500,000 and signing a 2-year
10% note payable for the balance. Interest is payable quarterly. The existing loan agreement
does not carry a provision to refinance. During September, Mark was experiencing financial
difficulty and was unable to pay the periodic interest.
What total amount of current liability should Mark Company report in its December 31, 2019
statement of financial position assuming Julian Company agreed after the balance sheet date
but before the financial statements authorized to issue not to demand payment as a consequence
of the breach?

6. Assuming the lender agreed on December 31, 2019 to provide a grace period of 12 months for
the entity to rectify the breach and assured Mark Company that no demand is to be made within
the grace period, what amount of current liabilities should Mark Company report in its
December 31, 2019 statement of financial position?

7. The accounts shown below appear in the December 31, 2019 trial balance of Hollow
Corporation:
Preference share, authorized, P50 par P 10,000,000
MANUEL L. QUEZON UNIVERSITY School of Accountancy and Business Arts
Integrated Review in Theory of Accounts and Practical Accounting 1 Day 1

Unissued preference share 3,600,000

Ordinary share, authorized, P20 par 4,000,000
Unissued ordinary share 2,000,000
Subscription receivable, preference share 380,000
Subscription receivable, ordinary share 360,000
Subscribe preference share 600,000
Subscribe ordinary share 440,000
Treasury share, preference, at cost 1,360,000
Share premium 1,700,000
Accumulated profit and losses 2,000,000
All subscription receivables are due in year 2020.
How much is the total shareholders’ equity of Hollow Corporation?

8. On October 1, 2019, Echo Company sold 20,000 gallons of heating oil to Santa Company at
P500 per gallon. Ten thousand gallons were delivered on December 20, 2019 and the remaining
10,000 gallons were delivered on January 10, 2020. Payment term were: 50% due on October
10, 2019; 25% due on 1st delivery and the remaining on the second delivery.
What amount of revenue should Echo recognize from this sale?

9. Pristine Company reported the following information for 2019:

Sales revenue P 500,000
Cost of goods sold 350,000
Operating expenses 55,000
Unrealized translation gain 20,000
Cash dividends received on the securities 2,000
Ignore income tax, for 2019, Pristine Company would report comprehensive income before tax
of

10. For the year ended December 31, 2019, Traffic Inc. reported the following:
Net income P 180,000
Preference share dividend declared 30,000
Ordinary share dividends declared 6,000
Unrealized holding loss, net of tax 3,000
Retained earnings 240.000
Ordinary share capital 120,000
Accumulated Other Comprehensive Income,
Beginning Balance, net of tax 15,000
What would Traffic report as its ending balance of Accumulated Other Comprehensive
Income?

11. Gibson Company is part of a major industrial group and is known to accurately disclose related
party transactions in its financial statements. Remuneration and other payments made to the
entity’s chief executive officer during 2019 were:
Annual salary 2,000,000
Share option and other share-based payments 1,000,000
Contribution to retirement benefit plan 500,000
Reimbursement of travel expenses for business trips 1,200,000
What total amount should be disclosed as “compensation” to key management personnel?

12. Caroline Company provide the following events that occurred after December 31, 2019
1/15/2020 One of the entity’s factories with a carrying amount of P 4,000,000 which was
completely razed by forest fire that erupted in the vicinity.
2/14/2020 P 3,000,000 of accounts receivable was written off due to the bankruptcy of a major
customer.
MANUEL L. QUEZON UNIVERSITY School of Accountancy and Business Arts
Integrated Review in Theory of Accounts and Practical Accounting 1 Day 1

3/11/2020 A shipping vessel of the entity with carrying amount of P 5,000,000 was completely
lost at sea because of a hurricane.
3/20/2020 Receives claims from Insurance Company amounting to 2,000,000 for loss of factory
3/25/2020 A court case involving the entity as the defendant was settled and the entity was
obligated to pay the plaintiff for P 1,500,000. The entity previously has not recognized
a liability for the suit because management deemed it possible that the entity would
lose the case.
The management completed the draft of the financial statements for 2019 on February 10, 2020.
On March 20, 2020, the Board of Directors authorized the financial statements for issue. The entity
announced the profit and other selected information on March 22, 2020. The financial statements
were approved by shareholders on April 2, 2020 and filed with the SEC the very next day. What
total amount should be reported as adjusting events on December 31, 2019?

13. Jaguar Company has recorded bad debts expense in the past at a rate of 1.5% of net sales. In
2019, Jaguar decide to increase its estimate to 2%. If the new rate has been used in prior years,
cumulative bad debt expense would have been P 380,000 instead of P 285,000. In 2019, bad
debt expense will be P 120,000 instead of P 90,000.
What amount of bad debt should the company report in its statement of comprehensive
income as a result of the change in estimate?

14. On January 1, 2017, Café Company purchased heavy equipment for P 10,560,000 and it is the
company’s policy to depreciate under the straight line method. The heavy equipment has a
useful economic life of eight years. On January 1, 2019, due to the physical wear on the
equipment, Café Company determined that the heavy equipment had a remaining useful
economic life of 3 years from and will the company reliably determined that the have a salvage
value would be P 960,000. An accounting change was made in 2019 to reflect these additional
data.
How much should be the balance of the accumulated depreciation for this equipment on
December 31, 2019?

15. Harbour Company reported the following events during 2020:

 It was decided to write off P 800,000 from inventory which was over two years old as
it was obsolete.
 Sales of P 600,000 had been omitted from the financial statement for the year ended
December 31, 2019.
What total amount should be reported as prior period error in the financial statements for the
year ended December 31, 2020?

16. Samar Company reported the following events during the year ended December 31, 2020:
 A counting error relating to the inventory on December 31, 2019 was discovered. The
require reduction in the carrying amount of inventory at that date of P 280,000.
 The provision for uncollectible accounts receivable on December 31, 2019 was P
300,000. During 2020, P 500,000 was written off the December 31, 2019 accounts
receivable.
What adjustment required to restate retained earnings on January 1, 2020?

17. Grace Company identified the following segment for the current year:
Segment Total revenue Profit (loss) Assets
A 2,800,000 300,000 9,000,000
B 6,000,000 (600,000) 8,000,000
C 2,300,000 60,000 6,500,000
MANUEL L. QUEZON UNIVERSITY School of Accountancy and Business Arts
Integrated Review in Theory of Accounts and Practical Accounting 1 Day 1

D 900,000 40,000 2,500,000

What are the reportable operating segment?

18. The following information pertains to Monique Company and its divisions for the current year:
Sales to unaffiliated customers 40,000,000
Intersegment sales of products similar to those
sold to unaffiliated customers 10,000,000
Interest earned on loans to other operating segments 4,000,000
The entity and all of its divisions are engaged solely in manufacturing operations. What is the
minimum amount of revenue of segment to be classified as reportable segment?

19. Bonvin Company experienced a P 500,000 decline in the market value of its inventory at the
end of the first quarter. The entity had expected this decline to reverse in the second quarter,
and in fact, the second quarter recovery exceeded the previous decline by P100,000. What
amount of gain or loss should be reported in the interim statements for the first and second
quarter?

20. Kenneth Company’s P 6,000,000 net income for the quarter ended September 30, 2020,
included the following after-tax items:
A P 900,000 gain realized in May 2020 was allocated equally to the second, third, and fourth
quarters of 2020.
A P 500,000 cumulative effect loss resulting from a change in inventory valuation method was
recognized on August 31, 2020.
In addition, the entity paid P 200,000 on February 1, 2020, for calendar-year property tax. Of
this amount, P 50,000 was allocated to the third quarter of 2020.
What is the net income for the quarter ended September 30, 2020?