Problem 36 14

Chapter 36: Statement of Financial Position and Comprehensive Income
Problem 36-14
Problem
The following trial balance relates to Atlas on 31 March 2021:
‘000 ‘000
Debit Credit
Equity shares of 50 centavos each (note (v)) P50,000
Share premium, 20,000
Retained earnings on 1 April 2020 11,200
Land and buildings - at cost (land ₱10 million), (note(ii)) ₱60,000
Plant and equipment - at cost (note (ii)) 94,500
Accumulated depreciation on 1 April 2020- buildings 20,000
Accumulated depreciation on1 April 2020: - plant,and equipment 24,500
Inventory on 31 March 2021 43,700
Trade receivables 42,200
Cash in bank 6,800
Deferred tax (note (iv)) 6,200
Trade payables 35,100
Revenue(note(i)) 550,000
Cost of sales 411,500
Distribution costs 21,500
Administrative expenses 30,900
Dividends paid 20,000
Bank interest 700
Current tax (note iv) 1,200
Total 725,00 725,000
Problem
The following notes are relevant:
(i) Revenue includes the sale of P10 million of maturing inventory made to
Xpede on 1 October 2020. The cost of the goods at the date of sale was
P7 million and Atlas has an option to repurchase these goods at any time
within three years of the sale at a price of P10 million plus accrued
interest from the date of sale at 10% per annum. On 31 March 2021, the
option had not been exercised, but it is highly likely that it will be before
the date it lapses.
(ii) Non-current assets: On 1 October 2020, Atlas terminated the production
of one of its product lines. From this date, the plant used to manufacture
the product has been actively marketed at an advertised price of P4.2
million which is considered realistic. It is included in the trial balance at a
cost of P9 million with accumulated depreciation (on 1 April 2020) of P5
million.
Problem
On 1 April 2020, the directors of Atlas decided that the financial statements would
show an improved position if the land and buildings were revalued to market
value. At that date, an independent valuer valued the land at ₱12 million and the
buildings at P35 million and these valuations were accepted bythe directors. The
remaining life of the buildings at that date was 14 years. Atlas does not make a
transfer to retained earnings for excess depreciation. (Assume for the purpose of
this problem that this is correct.) Ignore deferred tax on the revaluation surplus.
Plant and equipment are depreciated at 20% per annum using the reducing balance
method and time apportioned as appropriate.

All depreciation is charged to cost of sales, but none has yet been charged on any
non-current asset for the year ended 31 March 2021.
Problem
(iii) On 31 March 2021, a provision is required for directors' bonuses
equal to 1% of revenue for the year.

(iv) Atlas estimates that an income tax provision of₱27.2 million is
required for the year ended 31 March 2021 and at that date the liability to
deferred tax is P9.4 million. The movement on deferred tax should be
taken to profit or loss. The balance on current tax in the trial balance
represents the under/over provision of the tax liability for the year ended
31 March 2020.

(v)On 1 July 2020, Atlas made and recorded a fully subscribed rights issue
of 1 for 4 at ₱1.20 each. Immediately before this issue, the stock market
value of Atlas's shares was P2 each.
Questions:
Based on the above and the result of your audit, you are to provide the answers
to the following:

1. How much is the total revenue for the year ended March 31,2021?
a. P500,000,000 b. P540,000,000
c.P560,000,000 d. P540,500,000

2. How much is the total cost of sales for the year ended March 31,2021?
a. P393,400,000 b. P404,500,000
c. P407,000,000 d.P420,600,000

3. How much is the total profit for the year ended March 31,2021?
a. P31,200,000 b. P38,200,000
c. P51,200,000 d. P60,400,000

Questions:
4. How much is the total comprehensive income for the year ended March 31,
2021? c.P51,200,000
a. P31,200,000 b. P38,200,000
c.P51,200,000 d. P60,400,000

5. How much is the total current assets for the year ended March 31,2021?
a. P88,500,000 b. P89,500,000
c. P92,900,000 d. P96,500,000

6. How much is the total noncurrent assets for the year ended March 31, 2021?
a. P44,500,000 b. P52,800,000
c. P97,300,000 d. P103,000,000
Questions:
7. How much is the total current liabilities for the year ended March 31,2021?
a. P62,300,000 b. P67,700,000
c. P74,500,000 d. P75,000,000
8. How much is the total noncurrent liabilities for the year ended March 31, 2021?
a. P9,400,000 b. P10,500,000
c. P19,400,000 d.₱19,900,000

9. How much is the total equity for the year ended March 31,2021? c.P106,400,000
a. P92,400,000 b. P 99,400,000
c. P106,400,000 d. P119,400,000

10. What is the basic earnings per share for the year ended March 31,2021?
a. P.3226 b. P.3950
c. P.5295 d. P.6246
Total revenue for the year ended March 31, 2021.
Unadjusted sales Less P550,000,000

Sale with a repurchase agreement (selling price) (10,000,000)
Adjusted Sales P540,000,000 -B
Total Cost of Sales - March 31, 2021
Unadjusted cost of sales 411,500,000
Less: Sale with a repurchase agreement(cost) 7,000,000
Add: Depreciation on Plant * 13,600,000
Depreciation on Building(35,000,000/14) 2,500,000
Adjusted cost of sales 420,600,000 – D.

*Depreciation of plant asset
Plant asset classified as held for sale
[(9,000,000 - 5,000,000) x 20% x 6/12] 400,000
Remaining plant asset[(70,000,000-4,000,000)x20%] 13,200,000
Total plant asset depreciation 13,600,000

Non-current asset held for sale
Fair value less cost to sell 4,200,000
Carrying value date of classification(4,000,000-400,000] 3,600,000
Initial carrying amount- LOWER 3,600,000
Total Profit - March 31, 2021
Sales P 540,000,000
Less:Cost of sales 420,600,000
Gross profit 119,400,000
Less: Distribution cost 21,500
Administrative expenses 30,900,000
Interest [(700 + (10,000 x 10% x 6/12)] 1,200,000
Provision for bonus (540,000x1%) 5,400,000
Tax expense (increase in DTL and CTL)-(27,200+9,400) 29,200,000
Net income P31,200,000 – A.
Total Comprehensive Income - March 31, 2021
Net income 31,200,000
Add: Revaluation surplus** 7,000,000
Total comprehensive income 38,200,000 – B.
**Land:
Appraised value 12,000,000
Carrying amount 10,000,000 2,000,000

Building:
Appraised value 35,000,000
Less:Carrying amount (50,000,00-20,000,000) 30,000,000 5,000,000
Total revaluation surplus 7,000,000

Total Current and Non-current Assets- March 31, 2021
Total Current Assets:
Trade receivables 42,200,000
Inventory(43,700+7,000) 50,700,000
Non-current asset held for sale 3,600,000 96,500,000 (5) D.
Total Non-current Assets

Land 12,000,000
Building(35,000-2,500) 32,500,000
Plant(66,000-13,200) 52,800,000 97,300,000 (6) C.

Total assets 193,800,000

Total Current and Non-current Liabilities- March 31, 2021
Total Current Liabilities:
Trade payables 35,100,000
Bank overdraft 6,800,000
Current tax liability 27,200,000
Provision-bonus 5,400,000 74,500,000 (7) C.
Total Non-current Liabilities

Deferred tax liability 9,400,000
Bank loan 10,000,000
Interest payable 500,000 19,900,000 (8) D.

Total liabilities 94,400,000
Total Equity - March 31, 2021
Equity shares 50,000,000

Share Premium 20,000,000
Revaluation surplus 7,000,000
Retained earnings * 22,400,000 99,400,000 (9) B.

Total liabilities and shareholders' equity 119,640,000
* Retained Earnings, beg. 11,200,000

Net Income 31,200,000
Dividends paid (20,000,000)
Retained Earnings, end. 22,400,000
Basic earnings per share - March 31, 2021
Net income 31,200,000

Divided by:Weighted average share*** 96,739,000
Earnings per share .3225

***April 1 to July 1(80,000^ x2/1.84 ^^x3/12) 21,739,000
July 1 to March 31 (100,000x9/12) 75,000,000
Weighted average number of shares 96,739,000
Basic earnings per share - March 31, 2021
^The number of shares before the exercise of the rights may be computed by
dividing the (P50,000/50 centavos) by 125% (100%+1/4 rights).

^^Value of one right = Fair value per share-right on minus exercise price
Number of rights to purchase one share plus 1
Value of one right = P2- P1.20
4+1
= P.16

Fair value per share-right on P2.00
Less:Theoretical value of one right .16
Theoretical ex-rights fair value per share P1.84
Thank you! 

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Problem 36 14

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Chapter 36: Statement of Financial Position and Comprehensive Income

Unadjusted sales Less P550,000,000

Total Non-current Assets

Total Non-current Liabilities

Equity shares 50,000,000

* Retained Earnings, beg. 11,200,000

Net income 31,200,000

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