Practical Accounting I

Financial Statements
May 2, 2019

Problem I

Danica Company reported the following current assets on December 31, 2019:

Cash in bank, including P500,000 bank overdraft in another bank P 4,000,000

Accounts receivable 7,000,000
Notes receivable, net of discounted note P500,000 2,000,000
Inventory 4,500,000
Financial asset—FVPL 1,000,000
Financial asset—FVOCI 1,500,000
Prepaid expenses 200,000
Deferred tax asset 2,500,000
Equipment classified as “held for sale” 2,000,000
Total P24,700,000

Customers’ accounts, net of customers’ credit balances, P1,000,000 P5,000,000

Allowance for doubtful accounts (500,000)
Sale price of unsold goods out on consignment at 125% of cost and
excluded from ending inventory 2,500,000
Net accounts receivable P7,000,000

What amount should be reported as total current assets on December 31, 2019?

Problem II

Leika Company provided the following information on December 31, 2019:

Accounts payable, net of creditors’ debit balances, P200,000 P2,000,000

Accrued expenses 800,000
Bonds payable due December 31, 2020 2,500,000
Premium on bonds payable 300,000
Deferred tax liability 500,000
Income tax payable 1,100,000
Cash dividend payable 600,000
Stock dividend payable 400,000
Note payable—6% due March 1, 2020 1,500,000
Note payable—8% due October 1, 2020 1,000,000

The financial statements for 2019 were issued on March 31, 2020. On December 31, 2019, the 6% note payable was refinanced on
a long-term basis. Under the loan agreement for the 8% note payable, the entity has the discretion to refinance the obligation for
at least twelve months after December 31, 2019.

What amount should be reported as total current liabilities?

Problem III

Timothy Company provided the following information for the current year:

Income from continuing operations P4,000,000

Income from discontinued operations 500,000
Unrealized gain on financial asset—FVPL 800,000
Unrealized loss on equity investment—FVOCI 1,000,000
Unrealized gain on debt investment—FVOCI 1,200,000
Unrealized gain on futures contract designated as a cash flow hedge 400,000
Translation loss on foreign operation 200,000
Net “remeasurement” gain on defined benefit plan during the year 600,000
Loss on credit risk of a financial liability designated at FVPL 300,000
Revaluation surplus during the year 2,500,000

What amount should be reported as comprehensive income for the current year?

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Practical Accounting I
Financial Statements
May 2, 2019

Problem IV

Patricia Company provided the following information for the preparation of a statement of cash flows:

2019 2018
Cash P 350,000 P 320,000
Accounts receivable 330,000 300,000
Inventory 310,000 470,000
Property, plant, and equipment 1,000,000 950,000
Unamortized bond discount 45,000 50,000
Cost of goods sold 2,500,000 3,800,000
Distribution costs 1,415,000 1,720,000
General and administrative expenses 1,370,000 1,513,000
Interest expense 43,000 26,000
Income tax expense 204,000 612,000
P7,567,000 P9,761,000

Allowance for doubtful accounts P 13,000 P 11,000

Accumulated depreciation 165,000 150,000
Trade accounts payable 250,000 175,000
Income tax payable 210,000 271,000
Deferred tax liability 53,000 46,000
8% callable bonds payable 450,000 200,000
Ordinary share capital 500,000 400,000
Share premium 91,000 75,000
Retained earnings 447,000 646,000
Sales 5,388,000 7,787,000
P7,567,000 P9,761,000

The entity purchased P50,000 in equipment during 2019.

The entity allocated one-third of depreciation expense to distribution costs and the remainder to general and administrative
expenses.

What amounts should be reported in the statement of cash flows for the year ended December 31, 2019 for the following:

1. Cash collected from customers

2. Cash paid for goods to be sold
3. Cash paid for interest
4. Cash paid for income tax
5. Cash paid for distribution costs

Problem V

During the current year, Kient Company engaged in the following transactions:

Key management personnel compensation P2,000,000

Sales to affiliated entities 3,000,000

What total amount should be included as related party disclosures in Kient Company’s separate financial statements for the
current year?

Problem VI

The financial statements of Danah Company were authorized for issue on March 31, 2020 and the end of the reporting period is
December 31, 2019.

On December 31, 2019, the entity had an account receivable of P1,000,000 from a customer. On February 1, 2020, the liquidator
of the said customer advised the entity in writing that the customer was insolvent and that no amount would be paid.

The entity had reported a contingent liability on December 31, 2019 related to a court case. On March 1, 2020, the judge handed
down a decision against the entity for damages amounting to P1,500,000.

What amount should be reported as “adjusting events” on December 31, 2019?