Problem 1.

Hard Company provided the account balances on December 31, 2017:

Share Capital 5,000,000 SHE

Share Premium 500,000 SHE
Retained earnings 880,000 SHE
Serial Bonds Payable (500,000 due every July 1 of each year) 2,500,000 500 CL; 2M NCL
Employee income tax payable 20,000 CL
Notes Payable (if there is no terms, current liabilities) 100,000 CL
Accrued Expenses 30,000 CL
Accrued interest on note payable 10,000 CL
Income tax payable 60,000 CL
Allowance for doubtful accounts (50,000) CA
Advances from customers 100,000CL
Accounts Receivable 500,000 CA
Accumulated Depreciation- building 1,600,000 NCA -
Accumulated Depreciation
machinery – 1,300,000 NCA -
Financial Asset at amortized cost 1,500,000 NCA
Land 1,500,000 NCA
Machinery 2,000,000NCA
Factory Supplies 50,000 CA
Notes Receivable (if silent as to terms, CA) 150,000 CA
Building 4,000,000NCA
Cash 420,000 CA
Claim receivable (trade receivables) 20,000 CA
Finished Goods (inventory) 400,000 CA
Franchise 200,000NCA
Goods in process (inventory) 600,000 CA
Prepaid Insurance 20,000 CA
Raw Materials (inventory) 200,000 CA
Financial assets at fair value 250,000 CA
Tools 40,000 NCA
Goodwill 100,000NCA

Plant expansion fund 500,000 NCA

Accounts payable 300,000 CL

Compute for the ff:

1. Current Assets 2. Non-Current Assets 3. Current Liability 4. Non-current Liabilities 5. SHE
2,000,0000 6,380,000

Problem 2. Parker Company reported operating expenses as distribution and general or administrative.
The adjusted trial balance at the end of the current year included the following expense accounts:
Income from continuing operations 8,000,000 NI
Income from Investment in associate 300,000 ignored, part of Con.Op.
Gain from sale of equipment 100,000 ignored, part of Con.Op.
Accounting and legal fees 1,450,000 Admin Exp
Advertising 1,500,000 Distri Exp
Freight-out 750,000Distri Exp
Interest 600,000Finance Cost
Loss on sale of long-term investment 300,000 Other Expenses
Officers’ salaries 2,250,000 Admin Exp
Property taxes and insurance 300,000 Admin Exp
Office rent expense (half of the premises is occupied by sales dept) 1,800,000 50% AE; 50% DE
Sales Salaries and Commissions 1,400,000 DE
Income from discontinued operations 500,000 NI
Unrealized loss on equity investment
FVOCI – 1,000,000 OCI
Unrealized gain on debt investment
FVOCI – 1,200,000 OCI
Unrealized gain on futures contract designated as a cash flow hedge 400,000 OCI
Translation loss on foreign
Net remeasurement loss onoperation
defined benefit plan 200,000
600,000 OCI
OCI
Unrealized gain on financial
FVPLasset – 800,000 ignored, part of Con.Op.
 Loss on credit risk of a financial liability at FVPL 300,000 OCI
Revaluation surplus during the year 2,500,000 OCI

1. What total amount should be included in distribution expense for the current year?
2. What amount of these costs should be reported as administrative expenses?
3. What amount should be reported as net income for the current year?
4. What net amount should be reported as OCI for the current year?
5. What amount should be reported as comprehensive income for the current year?

Problem 3. An entity provided the following increases (decreases) in the statement of financial position
accounts on December 31, 2017 and 2016:
Cash and cash equivalents 120,000
Available for sale securities PAS 39-OCI 300,000 Investing -
Accounts Receivable, net -
Inventory 80,000Operating -
Long-term investment (100,000)
Plant assets 700,000
Accumulated depreciation -
Accounts payable (5,000) Operating -
Dividend payable 160,000
Short term bank debt 325,000 Financing +
Long-term debt 110,000
Share Capital, P10 par 100,000 Financing +
Share premium 120,000 Financing +
Retained earnings 290,000

 Net income for the current year was P790,000. Operating +

 Cash dividend of P500,000 was declared. 500,000 – 160,000 = 340,000; Financing -
 Building costing P600,000 and with carrying amount of P350,000 was sold for P350,000. 350,000;
Investing +
 Equipment costing 110,000 was acquired through issuance of long-term debt.
 A long-term investment was sold for P135,000. There were no other transactions affecting long-term
investment. 135,000 = Investing +; 135,000 – 100,000 = 35,000 gain Operating -
 The shares were issued for cash. 100,000 (SC) + 120,000 (SP) = 320,000 Financing +
Depreciation Expense:
Depreciation Expense ? 250,000 (workback) Opearating +
Sale of Building (AD) (250,000)
AD, balance 0

Acquisition of Equipment:
Plant asset,balance 700,000
Building sold 600,000
Equipment acquired (110,000)
Cash transaction 1,190,000 Investing -

1. What is the net cash provided by operating activities? 920,000

2. What is the net cash used in investing activities? 1,005,000
3. What is the net cash provided by financing activities? 205,000

Problem 4. On October 1, 2017, Builder Company has a building with a cost of 4,000,000 and accumulated
depreciation of 3,100,000. The company commits to a plan to sell the building by February 1, 2018. On October
1, 2017, the building has an estimated selling price of 800,000, and it is estimated that selling costs associated
with the disposal of the building will be 120,000. On December 31, 2017, the estimated selling price of the
building has increased to 1,200,000, with estimated selling costs remaining at 120,000.

1. At the time of reclassification as held for sale, what amount should the noncurrent asset held for sale be
recognized? 900,000 (CA) vs 680,000 (FVLCD) = Lower 680,000 (FVLCD)
2. What amount of loss should Builder Company recognize at the time the building was reclassified as held for
sale? 680,000 – 900,000 = 120,000 impairment loss FVLCD < CA
1. What amount should be reported as income from discontinued operation for 2015? 6,300,000. PFRS 5, par
34, provides that if a disposal group is classified as held for sale in the current year, the results of the disposal group f or prior period
shall be re-presented as relating to discontinued operation in the comparative figures for the current year’s income statement.

Problem 9. Correy Company and its divisions are engaged solely in manufacturing operations. The following
data pertain to the industries in which operations were conducted for the current year:
Industry Revenue Profit (Loss) Assets
A 10,000,000 (1,750,000) 20,000,000
B 8,000,000 1,400,000 17,500,000
C 6,000,000 (1,200,000) 12,500,000
D 3,000,000 550,000 7,500,000
E 4,250,000 675,000 7,000,000
F 1,500,000 225,000 3,000,000

1. How many reportable segments does Correy have? 5 reportable operating segments
An operating segment is considered as REPORTABLE if it meets any of the ff quantitative threshold:
1. The segment revenue (internal and external) is 10% or more of the combined segment revenue of all operating
segments.
2. The absolute amount profit or loss whichever is higher is 10% or more
3. The assets of the segment is 1 0% or more of the combined assets of all operating segments.
Problem 10. On January 1, 2013, Brazilia Company purchased for P4,800,000 a machine with a useful life of
10 years and a residual value of P200,000. The machine was depreciated by the double declining balance. The
entity changed to the straight line method on January 1, 2015. The residual value did not change.

1. What is the accumulated depreciation on December 31, 2015?

2. What is the carrying amount of machine for the year ended December 31, 2017?
3. What is the depreciation expense for 2016?
Answers:
1. December 31, 2013 4,800,000 x 20% = 960,000
December 31, 2014 (4,800,000– 960,000) x 20% = 768,000
December 31, 2015 (4,800,000– 960,000 – 768,000 -200,000) / 8 yrs = 359,000
Accumulated Dep for 2015 = 960,000+768,000+359,000 = 2,087,000
2. CA on Dec 31, 2017: 4,800,000– 2,087,000 – 359,000 – 359,000 = 1,995,000
3. 359,000

Problem 11. X Company experienced a P500,000 decline in the market value of inventory at the end of the
first quarter. The entity had expected this decline will reverse in the second quarter, and in fact, the second
quarter recovery exceeded the previous decline by P100,000.

1. What amount of gain or loss should be reported in the interim statements for the first quarter? (500,000)
Impairment loss

2. What amount of gain or loss should be reported in the interim statements for the second quarter? 500,000

PFRS 5, par 21, if subsequently there is an increase in the FVLCD the entity shall recognize a gain but not in excess of any
impairment loss previously recognized.