University of San Jose – Recoletos

College of Commerce
Accountancy and Finance Department
Intermediate Accounting 4 (Accounting 105)
Financial Statements
Ivan C. Ricaña,CPA,CrFA,LPT,CTT,MPA(COP)

Compute for and/or provide what is/are asked. Show your solutions.

Problem 1

A Company’ trial balance reflected the following account balances on December 31,
2019:

Cash, net of bank overdraft of ₱300,000 an unreleased check of ₱1,000,000

₱100,000 and including customer's postdated check of ₱50,000 and
sinking fund amounting to ₱280,000
Accounts Receivable 3,250,000
Investment Securities Held for Trading (includes long-term investment 1,800,000
of ₱500,000 in ordinary shares of B Corporation)
Inventories (includes goods received on consignment of ₱200,000) 800,000
Prepayments 391,000
Property and Equipment (excluding ₱300,000 of equipment still in use 5,000,000
but fully depreciated)

An analysis of Accounts Receivable disclosed the following:

Trade Accounts Receivables ₱3,000,000

Allowance for Doubtful Accounts (200,000)
Selling price of A Company's unsold goods sent to C Company on 450,000
consignment at 125% cost and excluded from A Company's ending
inventory)
₱3,250,000

Prepaid Expenses consist of the following:

Prepaid Insurance ₱48,000

Deposit to supplier for inventories to be delivered in 16 months 23,000
Prepaid Taxes 300,000
Cash Surrender Value 20,000
₱391,000

In 2019, estimated tax payments of ₱300,000 were charged to Prepaid Taxes. A Company
has not yet recorded Income Tax Expense. There were no differences between
accounting net income and net taxable income. Income tax rate is 30%.

Adjusted total revenues and expenses for the year are ₱3,000,000 and ₱2,000,000,
respectively.

Compute for:
1. Total current assets as of December 31, 2019.
2. Total noncurrent assets as of December 31, 2019.
Solution to Problem 1

Requirement No. 1

Cash ₱1,000,000
Bank overdraft - should not be netted;
part of current liabilities 300,000
Unreleased check - still part of cash;
corresponding AP must still be recognized 100,000
Customer's post-dated check - still not
cash; corresponding AR must still be
recognized (50,000)
Sinking fund - part on noncurrent assets (280,000) ₱1,070,000
Accounts Receivable ₱3,250,000
Selling price of consigned goods (450,000)
Customer's post-dated check 50,000 2,850,000
Investment Securities Held for Trading ₱1,800,000
Long-term investment (500,000) 1,300,000
Inventories ₱800,000
Goods received on consignment (200,000)
Cost of consigned goods recorded as sales 360,000 960,000
Prepaid Expenses ₱391,000
Deposit to supplier (23,000)
Prepaid taxes (300,000)
Cash surrender value (20,000) 48,000
Total Current Assets ₱6,228,000

Requirement No. 2

Sinking Fund ₱280,000

Long-term Investment 500,000
Property, Plant and Equipment 5,000,000
Deposit to Supplier 23,000
Cash Surrender Value 20,000
Total Current Assets ₱5,823,000
Problem 2

D Company’s trial balance reflected the following account balances on December 31,
2019:

Cash, net of bank overdraft of ₱300,000 and unreleased check of ₱1,000,000

₱100,000 and including customer's post-dated check of ₱50,000 and
sinking fund amounting to ₱280,000
Accounts Payable net of debit balance in supplier's accounts 1,000,000
amounting to ₱25,000
Bonds Payable 3,400,000
Premium on Bonds Payable 200,000
Deferred Tax Liability 400,000
Property Dividends Payable 400,000
Income Tax Payable 300,000
Note Payable, due January 31, 2020 500,000
Contingent Liability 150,000
Share Dividends Payable 320,000
Cash Dividends Payable 80,000
Financial Liabilities at FVPL 130,000
Reserve for Contingencies 430,000
Estimated expenses for meeting warranties 335,000
Estimated damages as a result of unsatisfactory performance on a 268,000
contract
Mortgage Payable 1,000,000
Loans Payable (payable in five equal annual installments) 500,000

Compute for:
1. Total current liabilities as of December 31, 2019.
2. Total noncurrent laibilities as of December 31, 2019.
Solution to Problem 2

Requirement No. 1

Bank Overdraft ₱300,000

Accounts Payable ₱1,000,000
Overpayment to supplier - should not be
netted; considered as asset 25,000
Unreleased check - still part of AP 100,000 1,125,000
Property Dividends Payable 400,000
Income Tax Payable 300,000
Notes Payable 500,000
Cash Dividends Payable 80,000
Financial Liabilities at FVPL 130,000
Estimated Warranty Liability 335,000
Estimated Liability for Damages 268,000
Loans Payable - Current Portion 100,000
Total Current Liabilities ₱3,538,000

Requirement No. 2

Bonds Payable ₱3,400,000

Premium on Bonds Payable 200,000 ₱3,600,000
Deferred Tax Liability 400,000
Mortgage Payable 1,000,000
Loans Payable - Noncurrent Portion 400,000
Total Noncurrent Liabilities ₱5,400,000
Problem 3

E Company’s trial balance reflected the following account balances on December 31,
2019:

Share Capital ₱10,000,000

Share Premium 1,000,000
Subscribed Share Capital 100,000
Subscription Receivable 120,000
Treasury Shares, at cost 2,000,000
Unrealized Gain - securities at FVOCI 1,000,000
Retained Earnings 6,000,000
Reserve for Contingencies 3,000,000
Revaluation Surplus 4,000,000
Cumulative Translation Adjustment - Debit 1,500,000

Compute for the total shareholders’ equity as of December 31, 2019.

Solution to Problem 3

Share Capital ₱10,000,000

Share Premium 1,000,000
Subscribed Share Capital 100,000
Subscription Receivable (120,000)
Treasury Shares, at cost (2,000,000)
Unrealized Gain - securities at FVOCI 1,000,000
Retained Earnings 6,000,000
Reserve for Contingencies 3,000,000
Revaluation Surplus 4,000,000
Cumulative Translation Adjustment - Debit (1,500,000)
Total Shareholders' Equity ₱21,480,000
Problem 4

F Company’s trial balance reflected the following account balances on December 31,
2019:

Auditing and Accounting Fees ₱300,000

Advertising 500,000
Delivery Expense 300,000
Interest 125,000
Loss on Sale - Long-term Investment 110,000
Officers' Salaries 625,000
Rent 500,000
Insurance 200,000
Sales Commission 1,075,000
Loss on Sale - Equipment 75,000
Depreciation - Factory Machine 12,500
Depreciation - Office Equipment 15,000
Depreciation - Delivery Truck 14,000

Compute for:
1. Total distribution cost for the year ended December 31, 2019.
2. Total general and administrative expenses for the year ended December 31,
2019.

Solution to Problem 4

Advertising ₱500,000
Delivery Expense 300,000
Rent Expense (1/2) 250,000
Sales Commissions 1,075,000
Depreciation – Delivery Truck 14,000
Total Distribution Costs ₱2,139,000

Auditing and Accounting Fees ₱300,000

Officers’ Salaries 625,000
Rent Expense (1/2) 250,000
Insurance 200,000
Depreciation – Office Equipment 15,000
Total Distribution Costs ₱1,390,000

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