Question
SCR Company provided the following information on December 31, 2016: Current Assets 6,200,000 Other Assets 11,800,000 Total Assets 18,000,000 Current Liabilities 2,000,000 Long term Liabilities
SCR Company provided the following information on December 31, 2016:
Current Assets 6,200,000
Other Assets 11,800,000
Total Assets 18,000,000
Current Liabilities 2,000,000
Long term Liabilities 2,000,000
Capital 14,000,000
Total liabilities and capital 18,000,000
Audit notes:
- Current assets include the following:
Cash (including P400,000 invested in money instrument and restricted foreign deposit of P600,000) P2,000,000
Land held for undetermined use, at acquisition cost (fair value, is at P1,200,000; the company opted to use
the cost model to account for such property) 1,000,000
Account receivable net of an allowance of P100,000
1,400,000
Inventories at cost (NRV is at P1,000,000)
1,200,000
SCR Company share capital at cost
600,000
Total
6,200,000
- Other assets include the following:
Store supplies
100,000
Building less accumulated depreciation of P1,000,000
6,000,000
Equipment less accumulated depreciation of P500,000
1,500,000
Financial assets at amortized cost - Held to maturity
1,200,000
Financial assets at fair value - through profit or losses
800,000
Trademark
600,000
Advances to officers - indefinite repayment
300,000
Patent
500,000
Land
800,000
Total
11,800,000
- Current liabilities include:
Accounts payable
P1,000,000
Notes payable, due December 31, 2017
200,000
Income tax payable
300,00
Share premium
500,000
Total
P2,000,000
- Long-term liabilities include:
Unearned leasehold income (five years starting 2017)
P700,000
Stock dividend payable
300,000
Serial bonds payable (P100,000 maturing annually)
1,000,000
Total
P2,000,000
- Capital includes:
Retained earnings
P3,000,000
Share capital, P100 par
10,000,000
Retained earnings appropriated for plant expansion
1,000,000
Total
P14,000,000
Requirements:
- What is the total current assets to be reported in the 2016 statement of financial position?
- 4,700,000 c. 5,400,000
- 4,900,000 d. 5,500,000
- What is the total non-current assets to be reported in the 2016 statement of financial position?
- 11,900,000 c. 12,600,000
- 12,500,000 d. 12,700,000
- What is the total current liabilities to be reported in the 2016 statement of financial position?
- 1,600,000 c. 1,740,000
- 1,700,000 d. 2,040,000
- What is the total non-current liabilities to be reported in the 2016 statement of financial position?
- 1,600,000 c. 1,460,000
- 1,700,000 d. 1,400,000
- What is the total stockholders' equity to be reported in the 2016 statement of financial position?
- 14,200,000 c. 14,600,000
- 14,000,000 d. 14,800,000
The following information were made available to you by Katz Corp. in line with your audit of its financial statements as of and for the period ended December 31, 2016:
Sales
P53,000,000
Purchases
32,000,000
Sales discount
2,000,000
Purchase discount
1,200,000
Sales returns and allowance
1,000,000
Purchase returns and allowance
800,000
Correction of merchandise inventory, beginning error, net of
Income tax - credit
400,000
Merchandise Inventory, January 1 (adjusted)
3,400,000
Merchandise Inventory, December 31
3,500,000
Distribution costs
5,000,000
General and administrative expenses
4,000,000
Interest expense
2,000,000
Gain on early extinguishment of long-term debt
500,000
Foreign translation adjustment, net of income tax - credit
250,000
Revaluation surplus for the period, net of income tax
700,000
Unrealized loss on financial assets at fair value through other
comprehensive income or losses, net of income tax
550,000
Investment income - equity method
3,000,000
Gain on expropriation of asset
2,000,000
Income tax expense
5,000,000
Proceeds from sale of land with a carrying value of P5,300,000
4,800,000
Dividends declared
1,300,000
Accumulated profits, January 1, 2016
4,200,000
Requirements:
- In a single-statement, statement of comprehensive income, how much shall be reported as cost of goods sold?
- 30,000,000 c. 29,600,000
- 29,900,000 d. 29,100,000
- In a single-statement, statement of comprehensive income, how much shall be reported as net income after tax before other comprehensive income/losses?
- 8,600,000 c. 9,600,000
- 9,100,000 d. 10,100,000
- In a single-statement, statement of comprehensive income, how much shall be reported as total other comprehensive income after tax?
- 2,400,000 c. 1,250,000
- 1,400,000 d. 150,000
- In a single-statement, statement of comprehensive income, how much shall be reported as total comprehensive income after tax for the year?
- 9,500,000 c. 10,500,000
- 10,000,000 d. 11,000,000
- What is the adjusted balance of the accumulated profits, and as December 31, 2016?
- 10,500,000 c. 12,400,000
- 12,000,000 d. 12,900,000
- Two entities are not necessarily related parties if
A.
one entity has significant influence over the other
C.
the entities share joint control over a third entity
B.
one entity has control over the other
D.
one entity has joint control over the other
- Related party transactions are not required to be disclosed when
A.
the only related party transactions are between the reporting entity and its owner-manager
B.
all related party transactions are at arm's length, ie the transaction takes place at same price, terms and conditions that apply to transactions between willing buyers and willing sellers in an active market
C.
a price is not charged in all related party transactions
D.
none of the above
- Entity A has significant influence over entity B. Entity B has significant influence over entity C. Assuming entity A does not have significant influence in entity C. From entity A's perspective
A.
entity B is a related party (but entity C is not a related party)
B.
entity C is a related party (but entity B is not a related party)
C.
entities B and C are both related parties
D.
Neither entity B nor entity C is a related party
- Entity A has significant influence over entity B. Entity B has significant influence over entity C. From entity C's perspective
A.
entity A is a related party (but entity B is not a related party)
B.
entity B is a related party (but entity A is not a related party)
C.
entities A and B are both related parties
D.
Neither entity A nor entity B is a related party
- Entity A has control over entity B. Entity B has control over entity C.
A.
From entity A's perspective, entities B and C are both related parties
B.
From entity B's perspective, entities A and C are both related parties
C.
From entity C's perspective, entities A and B are both related parties
D.
All of the above are true
- These are events that provide evidence of conditions that existed at the end of the reporting period
A.
Events after the reporting period
C.
Adjusting events
B.
Subsequent events
D.
Non-adjusting events
- An error or fraud discovered after the end of the reporting period but before the issuance of financial statements is to be treated as
A.
Non-adjusting event
C.
Adjusting event
B.
Prior period correction of error
D.
Change in accounting estimate
- At the end of reporting period, December 31, 2015, ABC Inc. carried a receivable from XYZ, a major customer, at P10 million. The "authorization date" of the financial statements is on February 16, 2016. XYZ declared bankruptcy on Valentine's Day (February 14, 2016). ABC Inc. will
A.
Disclose the fact that XYZ has declared bankruptcy in the footnotes.
B.
Make a provision for this event in its financial statements (as opposed to disclosure in footnotes).
C.
Ignore the event and wait for the outcome of the bankruptcy because the event took place after the year-end.
D.
Reverse the sale pertaining to this receivable in the comparatives for the prior period and treat this as an "error" under PAS 8.
- During the year 2016, Smarts Corp. was sued by a competitor for P 15 million for infringement of a trademark. Based on the advice of the company's legal counsel, Smarts Corp. accrued the sum of P 10 million as a provision in its financial statements for the year ended December 31, 2016. Subsequent to the reporting period, on February 15, 2017, the Supreme Court decided in favor of the party alleging infringement of the trademark and ordered the defendant to pay the aggrieved party a sum of P 14 million. The financial statements were prepared by the company's management on January 31, 2017, and approved by the board (authorized for issue) on February 20, 2017.
Provision for 2016 should be
A.
P 10 million
B.
P 14 million
C.
P 15 million
D.
P 0
- On February 10, 2017, after issuance of its financial statements for 2016, Smarts Company entered into a financing agreement with SVCR Bank, allowing Smarts Company to borrow up to P 2,000,000 at any time through 2019. Amounts borrowed under the agreement bear interest at 2% above the bank's prime interest rate and mature two years from the date of loan. Smarts Company presently has P 750,000 of notes payable with First National Bank maturing March 15, 2017. The company intends to borrow an amount of P 1,250,000 under the agreement with SVCR and liquidate the notes payable to First National. The agreement with SVCR also requires Smarts to maintain a working capital level of P 3,000,000 and prohibits the payment of dividends on common stock without prior approval by SVCR Bank.
From the above information only, the total short-term debt of Smarts Company as of the December 31, 2016 is
A.
P 0
B.
P 750,000
C.
P 1,000,000
D.
P 2,000,000
- Swift Corp. prepares its financial statements for its fiscal year ending December 31, 2016. Swift estimates that its product warranty liability is P 28,000 at December 31, 2016. On February 12, 2017, before the financial statements were issued, Swift received information about a product defect that will require a recall of all units sold in 2016. It is expected the product recall will cost an additional P 40,000 in warranty repairs.
What should Swift present in its December 31, 2016 financial statements?
A.
A footnote disclosure explaining the product recall
B.
A footnote disclosure listing the estimated amount of P 40,000 in warranty repairs and an explanation of the recall
C.
An estimated warranty liability of P 68,000
D.
No disclosure is necessary
- During 2016, Smarts Company became involved in a tax dispute with the BIR. At December 31, 2016, Smarts' tax advisor believed that an unfavorable outcome was probable and a reasonable estimate of additional taxes was P 250,000. After the 2016 financial statements were issued, Smarts received and accepted a BIR settlement offer of P 275,000.
What amount of accrued liability would Smarts have reported in its December 31, 2016 statement of financial position?
A.
P 325,000
B.
P 275,000
C.
P 250,000
D.
P 0
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