1. The following are taken from the records of EXILE Co. as of year-end.

Accounts payable 4,000 SSS contributions payable 12,000

Utilities payable 14,000 Cash dividends payable 8,000
Accrued interest expense 12,000 Property dividends payable 14,000
Advances from customers 2,000 Share dividends payable 6,000
Unearned rent 18,000 Finance lease liability 70,000
Warranty obligations 10,000 Bonds payable 240,000
Unearned interest on Discount on bonds payable (30,000)
Receivables 6,000
Income taxes payable 4,000 Security deposit 4,000
Obligation to deliver own Redeemable preference
shares worth a fixed shares issued 28,000
amount of cash 20,000
Preference shares issued 20,000 Constructive obligation 22,000
Requirement: Determine the financial liabilities to be disclosed in the notes.

2. CARDIGAN Co. has the following liabilities as of December 31, 20x1.

a. Trade accounts payable net of debit balance in supplier’s account of ₱10,000, net of
unreleased checks of ₱8,000, and net of postdated checks of ₱4,000.

₱600,000
b. Credit balance in customers’ accounts 4,000
c. Financial liability designated at FVPL 100,000
d. Bonds payable maturing in 10 equal annual installments of ₱200,000
2,000,000
e. 12%, 5-year note payable issued on October 1, 20x1 200,000
f. Deferred tax liability 10,000
g. Unearned rent 8,000
h. Contingent liability 20,000
i. Reserve for contingencies 50,000

Requirement: How much is the total current liabilities?

3. BETTY Co. has the following liabilities as of December 31, 20x1.

a. Trade accounts payable, including cost of goods received on consignment of ₱20,000
₱ 600,000
b. Held for trading financial liabilities 100,000
c. Deferred revenue 40,000
d. Bank overdraft 20,000
e. Income tax payable 100,000
f. Accrued expenses 10,000
g. Share dividend payable 24,000
h. Advances from affiliates payable in 15 months after year-end 46,000
i. Loan of JAMES, Inc. guaranteed by BETTY – it is possible that BETTY will be held liable for
the guarantee 90,000

Requirement: How much is the total current liabilities?

4. WILLOW Co. has a 10%, ₱2,000,000 loan payable as of December 31, 20x1 that is maturing on July 1, 20x2.
Interest on the loan is due every July 1 and December 31. On February 1, 20x2, WILLOW Co. entered into a
refinancing agreement with a bank to refinance the loan on a long-term basis. Both parties are financially
capable of honoring the agreement's provisions. WILLOW’s financial statements were authorized for issue on
March 15, 20x2. How much is presented as current liability in relation to the loan in WILLOW’s 20x1 year-end
financial statements?

5. IVY Co. has a 10%, ₱1,000,000 loan payable as of December 31, 20x1 that is maturing on July 1, 20x2. Interest
on the loan is due every July 1 and December 31. On February 1, 20x2, IVY Co. entered into a refinancing
agreement with a bank to refinance the loan on a long-term basis. Both parties are financially capable of
honoring the agreement's provisions. IVY has the discretion to refinance or roll over the loan for at least twelve
months from December 31, 20x1 under an existing loan facility. IVY’s financial statements were authorized for
issue on March 15, 20x2. How much is presented as current liability in relation to the loan in IVY’s 20x1 year-end
financial statements?
6. CHAMPAGNE PROBLEMS Co. has a 10%, ₱2,000,000 loan payable as of December 31, 20x1 that is maturing
on July 1, 20x2. Interest on the loan is due every July 1 and December 31. On December 1, 20x1, CHAMPAGNE
PROBLEMS Co. entered into a refinancing agreement with a bank to refinance the loan on a long-term basis.
The refinancing and roll over transaction were completed on December 31, 20x1. How much is presented as
current liability in relation to the loan in CHAMPAGNE PROBLEMS’s 20x1 year-end financial statements?

7. EPIPHANY Co. has a 10%, ₱2,000,000 loan payable as of December 31, 20x1 that is maturing on July 1, 20x2.
The loan is dated July 1, 19x1 and pays annual interest every July 1. On February 1, 20x2, EPIPHANY Co.
entered into a refinancing agreement with a bank to refinance the loan on a long-term basis. Both parties are
financially capable of honoring the agreement's provisions. EPIPHANY has the discretion to refinance or roll over
the loan for at least twelve months from December 31, 20x1 under an existing loan facility. EPIPHANY’s financial
statements were authorized for issue on March 15, 20x2. How much is presented as current liability in
EPIPHANY’s 20x1 year-end financial statements?

8. On January 1, 20x1, AUGUST Co. availed a 3-year, ₱2,000,000 loan from a bank. The loan agreement requires
AUGUST to maintain a current ratio of 2:1. If the current ratio falls below 2:1, the loan becomes payable on
demand. As of December 31, 20x1, AUGUST’s current ratio is 1.8:1. On January 5, 20x2, the bank agreed not to
collect the loan in 20x2 and gave AUGUST 12 months to rectify the breach of loan agreement. How much is
presented as current liability in relation to the loan in AUGUST’s 20x1 year-end financial statements?

9. On January 1, 20x1, HOAX Co. availed a 3-year, ₱2,000,000 loan from a bank. The loan agreement requires
HOAX to maintain a current ratio of 2:1. If the current ratio falls below 2:1, the loan becomes payable on
demand. As of December 31, 20x1, HOAX’s current ratio is 1.8:1. On December 31, 20x1, the bank agreed not
to collect the loan in 20x2 and gave HOAX 12 months to rectify the breach of loan agreement. How much is
presented as current liability in relation to the loan in HOAX’s 20x1 year-end financial statements?

10. On December 31, 20x1, MARJORIE Co. has a ₱2,000,000 note payable on demand. However, on December
31, 20x1, there is no indication that the payee on the note will demand payment over the next 12 months. How
much is the current liability in relation to the note in MARJORIE’s 20x1 year-end financial statements?

11. On December 31, 20x1, HAPPINESS ACTOR Co. has accounts payable of ₱2,000,000 before possible
adjustment for the following:
a. Goods in transit from a vendor to HAPPINESS on December 31, 20x1 with an invoice cost of ₱100,000
purchased FOB shipping point was not yet recorded.
b. Goods shipped FOB shipping point from a vendor to HAPPINESS was lost in transit. The invoice cost of ₱40,000
was not yet recorded.
c. Goods shipped FOB shipping point from a vendor to HAPPINESS on December 31, 20x1 amounting to ₱16,000
was recorded and included in the year-end physical count as “goods in transit.”
d. Goods in transit from a vendor to HAPPINESS on December 31, 20x1 with an invoice cost of ₱20,000 purchased
FOB destination was not yet recorded. The goods were received in January 20x2.
e. Goods with invoice cost of ₱30,000 was recorded and included in the year-end physical count as “goods in
transit.” It was found out that the goods were shipped from a vendor under FOB destination.
f. Checks drawn but not yet released to payees amounted to ₱24,000 while checks drawn and released to payees
but were postdated amounted to ₱10,000.
g. On December 28, 20x1, a vendor authorized HAPPINESS to return for full credit goods shipped and billed at
₱50,000 on December 14, 20x1. HAPPINESS shipped the returned goods on December 31, 20x1 but the credit
memo was received and recorded only on January 3, 20x2.
h. Goods shipped FOB shipping point, freight prepaid from a vendor on December 28, 20x1 was recorded at
invoice cost at shipment date. The invoice cost is ₱28,000 while the freight cost is ₱6,000.
i. Goods shipped FOB destination, freight collect were received on December 29, 20x1. The invoice cost of
₱80,000 was credited to accounts payable on date of receipt and the related freight of ₱10,000 was debited to
an expense account.

Requirement: Compute for the adjusted accounts payable on December 31, 20x1.

12. DOROTHEA Co. requires advance payments for custom-built guitar effects, gadgets, and racks. The records of
DOROTHEA show the following:
 Unearned revenue, January 1, 20x1 ₱ 2,000,000
 Advances received during 20x1 20,000,000
 Advances applied to orders shipped in 20x1 16,000,000
 Advances pertaining to orders cancelled in 20x1 600,000
Requirements:
Compute for the current liability assuming:
(a) the advance payments received are non-refundable and
(b) the advance payments received are refundable.

13. TOLERTAE IT Co. sells service contracts that cover a 2-year period. The sales price of each contract is ₱2,000.
TOLERTAE sold 1,000 contracts evenly throughout 20x1. TOLERTAE’s past experience shows that of the total
pesos spent for repairs on service contracts, 40% is incurred evenly during the first contract year and 60%
evenly during the second contract year.

Requirements:
(a) How much are the current and noncurrent portions of the deferred revenue to be presented in TOLERTAE’s 20x1
statement of financial position?
(b) How much is the service revenue recognized in 20x2?

14. GOLD RUSH Co. sells subscriptions for an industry publication published monthly and shipped to subscribers
every 15th of the month preceding the month of issue. Subscriptions received after the November 1 cut-off date
are held for publication in the following year. Receipts during 20x1 for subscriptions were made evenly.
Information on subscriptions is shown below:
Unearned revenue – January 1, 20x1 ₱ 6,000,000
Receipts from subscriptions during 20x1 48,000,000

Requirement:
a. How much is the unearned revenue balance on December 31, 20x1?
b. How much is the revenue from subscriptions during 20x1?

15. MIRRORBALL Co. sells subscriptions for an industry publication published semiannually and shipped to
subscribers on May 1 and November 1. Subscriptions received after April 1 and October 1 cut-off dates are held
for the next publication. Receipts during 20x1 for subscriptions were made evenly. Information on subscriptions
is shown below:
Unearned revenue – January 1, 20x1 ₱ 6,000,000
Receipts from subscriptions during 20x1 48,000,000

Requirement: How much is the unearned revenue balance on December 31, 20x1?

16. MY TEARS RICOCHET Co. has just opened a novelty store. RICOCHET decided to sell gift certificates as part
of its sales promotion. Transactions relating to the gift certificates during the year are shown below:
a. Sold gift certificates worth ₱200,000.
b. Gift certificates worth ₱160,000 were redeemed.
c. ₱20,000 gift certificates expired.
d. ₱4,000 gift certificates were estimated not to be redeemed.

Requirement: Provide the pertinent entries.

17. ILLCIT AFFAIRS Co. sells gift certificates that expire one year after their issuance. Information on gift certificates
is shown below:
Unearned revenue – gift certificates, Jan. 1, 20x1 ₱ 1,200,000
Gift certificates sold during 20x1 2,000,000
Prior year gift certificates redeemed in 20x1 800,000
Gift certificates sold and redeemed in 20x1 1,400,000

ILLCIT AFFAIRS's past experience indicates that 10% of gift certificates sold will not be redeemed. How much is the
unearned revenue on December 31, 20x1?

18. MAD WOMAN Co. requires deposits from customers for the containers of goods sold. The customers are
refunded for the deposits received when the containers are returned within two years from date of sale of the
related goods. Deposits for containers not returned within the time limit are regarded as proceeds from
retirement of the containers. Information for 20x3 is as follows:

Container deposits at December 31, 20x2, from deliveries in:

20x1 ₱40,000
 20x2 90,000 ₱130,000
Deposits for containers delivered in 20x3 180,000
Deposits for containers returned in 20x3 from deliveries in:
20x1 ₱18,000
20x2 50,000
20x3 92,000 160,000

Requirement: How much is the liability for deposits on returnable containers on December 31, 20x3?

19. On January 1, 20x1, INVISIBLE Co. leased a building to STRING, Inc. INVISIBLE required a security deposit
from STRING amounting to ₱200,000 which will be returned to STRING upon the expiration of the 10-year lease.
If there are damages on the building caused by STRING discovered upon the expiration of the lease, the cost of
rectification will be deducted from the security deposit. The appropriate discount rate is 10%.

Requirements: How much are the noncurrent liabilities relating to the security deposit on (a) January 1, 20x1 and on
(b) December 31, 20x1?

20. AUGUST Co. maintains escrow accounts and pays real estate taxes for its customers. Escrow funds are kept in
interest-bearing accounts. Interest, less a 10% service fee, is credited to the mortgagee’s account and used to
reduce future escrow payments. Information on escrow accounts are shown below:
Escrow accounts liability, January 1, 20x1 ₱ 400,000
Escrow payments received during 20x1 3,000,000
Real estate taxes paid during 20x1 1,000,000
Interest on escrow funds during 20x1 200,000

Requirement: How much is the current liability for the escrow accounts on December 31, 20x1?

21. HOAX Co. is preparing its December 31, 20x1 year-end financial statements. The following information was
gathered:
 The bill for December’s utility costs of ₱60,000 was received and paid on January 10, 20x2.
 A ₱40,000 advertising bill was received on January 2, 20x2. Of the total billing, ₱30,000 pertain to advertisements
in December 20x1 and ₱10,000 pertain to advertisements in January 20x2.
 A lease, effective December 16, 20x0, calls for a fixed rent of ₱200,000 per month, payable one month after the
commencement of the lease and every month thereafter. In addition, rent equal to 5% of net sales over
₱2,000,000 per year is payable on January 31 of the following year.
 Total cash sales and collections on accounts amounted to ₱2,000,000 and accounts receivable has a net increase
of ₱400,000. Commissions of 15% of sales are paid on the same day cash is received from customers.

Requirement: How much is the accrued liabilities as of December 31, 20x1?