ACC 221- Intermediate Accounting 3
Statement of Financial Position
Sample Problems and Suggested Answers
JMF, CPA
Problem 1
The accounts and balances shown below were gathered from Zechariah Corporation’s
trial balance on December 31, 2020. All adjusting entries have been made:
Wages Payable P 25,600
Cash 17,700
Mortgage Payable 151,600
Dividends Payable 14,000
Prepaid Rent 13,600
Inventory 81,800
Sinking fund assets 52,400
Short-term investments 15,200
Premium on bonds payable 4,600
Stock investment in Subsidiary 102,400
Taxes Payable 22,800
Accounts Payable 24,800
Accounts Receivable 36,600
Bonds Payable 550,000
A. The amount that should be reported as current assets on Zechriah Corporation’s
statement of financial position is
Suggested Answer: 164, 900
B. The amount that should be reported as current liabilities on Zechriah
Corporation’s statement of financial position is
Suggested Answer: 62, 400
CA NCA CL NCL
Wages Payable 25,600.00
Cash 17,700.00
Mortgage Payable 151,600.00
Dividends Payable 14,000.00
Prepaid Rent 13,600.00
Inventory 81,800.00
Sinking fund assets 52,400.00
Short-term investments 15,200.00
Premium on bonds payable 4,600.00
Stock investment in Subsidiary 102,400.00
Taxes Payable 22,800.00
Accounts Payable 24,800.00
Accounts Receivable 36,600.00
Bonds Payable 550,000.00
Totals 164,900.00 154,800.00 87,200.00 706,200.00
Problem 2
The accounts and balances shown below were taken from Basic Company’s trial
balance on December 31, 2018. All adjusting entries have been made.
Wages Payable, 250,000; Cash, 175,000; Bonds Payable, 600,000; Investment at
amortized Cost, 140,000; Prepaid Rent, 136,000; Inventory, 820,000; Investment in-
Sinking fund Assets, 525,000; Investment to Profit or Loss, 153,000; Discount on Bonds
Payable, 48,000; Investment in Subsidiary, 1,020, 000; Taxes Payable, 228, 000;
Accounts Payable, 248, 000; Accounts Receivable, 366,000; Property, Plant and
Equipment, 1,200,000; Patents-Net, 150,000; Accumulated Depreciation- PPE,
400,000; Land held for future business site, 900,000.
A. How much should be the reported current and non-current assets, respectively at
year end?
Suggested Answer: 1, 650, 000 and 3, 535, 000
B. How much should be the reported current and non-current liabilities, respectively
at year end?
Suggested Answer: 726, 000 and 552, 000
C. How much should be the reported shareholder’s equity at year end?
Suggested Answer: 3, 907, 000
CA NCA CL NCL Equity
Wages Payable 250,000.00
Cash 175,000.00
Bonds Payable 600,000.00
Investment at Amortized Cost 140,000.00
Prepaid Rent 136,000.00
Inventory 820,000.00
Sinking fund assets 525,000.00
Investment at Profit or Loss 153,000.00
Discount on bonds payable (48,000.00)
Stock investment in Subsidiary 1,020,000.00
Taxes Payable 228,000.00
Accounts Payable 248,000.00
Accounts Receivable 366,000.00
PPE 1,200,000.00
Patents- Net 150,000.00
Acc. Dep- PPE (400,000.00)
Land held for future Business Use 900,000.00
Totals 1,650,000.00 3,535,000.00 726,000.00 552,000.00 3,907,000.00
Problem 3
On July 1, 2018, Simple Company acquired machinery worth 2,500,000 from Thorny
Corporation. Terms of the contract calls for a down-payment of 500,000 and signing a 2
year 10% note payable for the balance. Interest is payable quarterly. The existing loan
agreement does not carry a provision to refinance. During September Easy was
experiencing financial difficulty and was unable to pay the periodic interest, thus
breaching the agreed covenant.
A. At what amount should the entity report current liabilities at year end?
Suggested Answer: 2, 100, 000
B. At what amount should the entity report as current liabilities at year end,
assuming the lender has provided a grace period of 1 year to rectify the breach?
Suggested Answer: 100, 000
Problem 4
The following data rae provided by Moon Company on December 31, 2018.
Cash in general checking account 500,000CA
Sinking fund to be used to retire bonds in 2021 1,200,000NCA
Cash held to pay value added taxes 300,000CA
Note Receivable- Due February 2020 2,200,000NCA
Accounts Receivable 2,100,000CA
Inventory 1,500,000CA
Prepaid Insurance 300,000CA
Vacant land held as investment 5,000,000NCA
Equipment classified as “held for sale” 200,000CA
Accounts Payable 1,400,000CL
Note payable- Due July 2019 800,000CL
Note Payable- Due January 2020 300,000NCL
Bonds Payable- Maturity 2021 4,600,000NCL
Salaries Payable 400,000CL
Value Added Tax Payable 300,000CL
What amount of working capital on December 31, 2018?
Suggested Answer: 2, 000, 000
Problem 5
Easy Company provided the following information on December 31, 2019:
Accounts Payable 350, 000
Accounts Receivable 450, 000
Property, Plant and Equipment 5, 600, 000
Accumulated Depreciation 1, 200, 000
Mortgage payable, due in 5 years 1, 500, 000
Share Capital, P100 par 4, 000, 000
Share Premium 500, 000
Cash and Cash Equivalents 800, 000
Accrued Expenses 100, 000
Inventories 900, 000
Long Term Investments 950, 000
Note Payable, long term debt 500, 000
Note payable, short term debt 200, 000
Office supplies unused 50, 000
Patent 800, 000
Prepaid Rent 150, 000
Retained Earnings 1, 350, 000
Compute for the total Assets, Liabilities and Equity respectively:
Suggested Answer:
Assets 8, 500, 000
Liabilities 2, 650, 000
Equity 5, 850, 000
