x FAR FAR.2642 - Statement of Profit or Loss r Stotement of Comprehensive INCOME) 5,000 DISCUSSION PROBLEMS Excel Professional Services, Ing: Management Firm of Professional Review ‘and Training Center (! - ee aaeeea a cago tye H7L | HRS Cn ee ge sun taba Ee a a is v yapeite (Caipanitas Md Seebw Iy. 5 meas ONoigg 238 see 1977 Or sICABARLES/SOLINAN/OCANPO EM aive income Asa cy fre 6 presentation of D/2. Which statement Is incorrect regarding Comprehensive ‘Statement of profit or loss and other Income? ICOTET ay may vse the, thie. ‘stmement, of BD sachensive income’ instead of ‘statement of Seon ar loss and other comprenensive INCOme ip, Rrvemity may present the prof or toss section in & Separate statement of profit or loss. wt of profit or Factory supplies used Faced goods Inventory. JOnUary Finis goods inventory, becember 3 Freight in Gain on sate of machinery Indirect labor = factory Insurance Interest expense Power and ughting ~ factory provision for income tax + 100,000, 190,000 + 2,000 ‘000 ‘eH prosented separately, the staermen Hpresnal immedately precede the statement presenting cory sae hich wrall —— PURCTSES Bogin with profit oF 105s Pure materia loventory, 220: 2 4 200,000 Arty ray event 2 enearen of prom rawr manure, D6= 32 240,000 or ener ‘comprenensive Income, 35 premiums - fectory 000° Ser ows, and other comprehensive, Fncame Snes, 1,500,000 roe Reain ane wei, fuss” SFA cu Seling expenses wane Taxes - s C2 An entity Dam omenyenrs | wenn Mime ber 5 + 40,000 ioscan Berd on Wort in process Inventory, Dec. 31 35,000 The nature of exPENseS. 5. The function of expense ost of goods sald was 2 Bther me nase PT aes or the function ot S 9}°345,000 gs ature Of Omri, whichever provides PO 223 4g imi ae eae relevant ‘Spenses wine the Srenees chaver the on ot pe, Toa debs and total adi selected eccounts of ‘ould prefer to present seal Caso ate dosing entries were posted are en BeIOw- ° Be p 3 An gobty classifying expenses Dy function, sha bits combs “28 Y gfinsshiinO crmation, on the nature of Materte 600,000 200,000, $<" ace ie minimum escosure does pat Cle. 4 Seema purchase Sooio0a 300,000" =°~ e beprcten pent! TEmproyes benatis °c Material Purchases 2,300,000 2,500,000 ‘Amortization Advertising 2 purense scouts ooann 100.000, ‘A 4. Tub Corp. reports operating expenses i Sea Direct labor afooe0 3 300,000 * Tfegories: (1). seling, and (2) general and \Manufacturing overhead 1'500,000 1,500,000 » ‘ne ated a ptance ince the Finished goods 300,000 400,000" >=“ a one cost was accounting nd egal fs mipogoors’ 3 i000 «6,900,000 ae Pied ‘b. P7,000,000 d. P7,400,000 Interest 70,000%=* oss on sale of long-term investment 30, eee SOR 7D neha et of Nes a te Seas ‘Rent for office space Eee, C ve ean Oe ‘statement of profit or loss of Sales salaries and commissions 0 ee pa cexieaeat the terentimerieoniie Decrease in laventories of finished ees ie Vee eee cervpled| By the, {goods and work in progress 107,900 ~ “Tup's total selling expenses stabi po cote 17,0007 Paros ng Pee nofnes Moats epee 43,000- 400,000 360,000 ee 18,000 — Loss for the year from discontinued PE ‘Kepler Manufacturers. presented to you some of its Rissakd 30,500 ~ 500 accounts with batances at December 31, in Other expenses a alphabetical order: ‘Other Income 5,500 11,300 70,000 4a RAW material and consumables used 000: ‘discounts and allowances eiooo Revenue ae Depreciation - pant and equipment 5 _po,opp) Stare of other comprehensive income peg Depreciation - seling and administrative eooo e: _of associates (Unrealized loss on Direct tabor = 150,000" ‘avallable-for-sale financial * ‘ : assets) 700 rate FAR.2642XCEL PROFESSIONAL SERVICES, Inc Te year ts, canal ze oa ‘The net income of Pirates ‘Company for the year wa: Selling expenses were eqve tthe cost of sales. Al ech expenses were sales. The costa sien of the company forthe ME Seis ovens 168,000 d. 281,000 9. You are preparing the Income statement of ‘Anonymous C, Company for the year ended December 31, 2018. You ‘determine that Company's. Income trom continuing ‘perations before income taxes is P2;400,000._ AL th You are considering the proper treatment of the listed below. Unless otherwise indicated, none of the IRems listed are included In P2,400,000 Income figure. changes in technology, Inventory 100,000 was written ot as obsoiete In toss before ‘unusual earthquake damaged te company's ‘on January 10, 2019 resulting in a loss to ‘Anonymous of 400,000. vs ® {ese of P360,000 was sustained on April 5, 2018 (=) as a result of typhoon damage t the company’s ‘warehouse in Davao. Typhoons rarely occur in that area. 4. Prior to 2018, Anonymous used an accelerated ‘depreciation method for tts plant equipment. In 2018, Anonymous changed to the straignt-ine oa ‘method for previously acquired equi ‘and ‘AL December 31, 2017, the ‘amount of plant equipment ° was. If the straignoiine method had mew acquistions. ‘carrying was used in previous ‘esting The 2018 ending Inventory’ has been recorded on the absorption ‘cost basis, but no sdjustment has been made to beginning Inventory, which has 2 ‘tel cost of P2,300,000, made up of Pi,400,000 direct materials and 300,000 direct \abor. ‘The ‘arutacuring overhead appicatien rate 75% of rect nbor cost, $F9.79% 965 7 f, On July 1, 2018, Anonymous paid vonchoiders 71,200,000 te retire Its bonds payable weh a carrying amount of P950,000. 2s°\~ How much should be reported as income from continuing operations before income taxes for the year ‘ended December 31, 20167 3,280,000 1,115,000 P1,015,000 , 1,690,000 A 10. The components. of ther comprehensive. income include: aN, PRE 1, Changes in revaluation surplus TI. Gains and losses on remeasuring avallable-for- sale financial assets LU, Effective portion of gains and losses on hedging Instruments In a cash flow hedge Ff defined benef plans siising trom ransiating the ot a oeige operation 1,1 Mt, TY, and V bo 1G ity and IV U1, angav dtu, and v 11 The components. of other comprehensive income 19 AK Accordance with PPRS 9 include t ‘Sune and losses from fnancat {om ts measured far wave tnrough OC} ea vol evorion of gains and. wsses on Te tte ments na ca now nege and the ‘ean nen neagingnetruments ane, en acments in eauly_ nstruments rates ad efor vane throu OC, et eva of the Ue waive of options Condes eg einen valve and cme non gener*ppuon contrect end cesigneting, #8 value of 9” rome ony the changes In the inne value, 1. aren't value ofthe forward elements of SERNES contracts when separating the forward {eon and pot element of a forward contract sit dognating as the hedging instrument only thd ange inthe epot element, and changes i he van ot the foreign currency baste spread of ‘Mhounsal nstument wlan axccing Irom the {cipnaton’ ot tha Anand! Instrument 98 the edging Inerurment for paricutr Hobtbes designated es at far value Through pro or lows, the amount of the change In fai vave that js aributabe fo changes inthe apn’ ret rik 1,11, m,1¥, nd {a0 tt na bn, nav Euan ui v a b a Which statement ts other comprehensive income? ‘Other comprehensive Income comprises items of Income and expenses (Including reclassification adjustments) that are not recognized in profit or loss as required or permitted by other PFRSS.cxt-bs" ‘An entity may present items of other comprehensive income either net of related tax fefects of before related tax effects with one amount shown for the aggregate amount of Income tax reiating to those Iterns. cr\a's- ecpommesean_cetusraaes ore sesones reciassiied to proft or loss In the current period that Were recognized in other comprehensive ‘Income in the current oF previous pertods. =n Reclassificstion adjustments arise on all Items of ‘other comprehensive income, Ctcin pie Incorrect regarding 13. The other comprehensive income section shall present line Items for amounts of other comprehensive incom In the period, classified by nature (including sHere of the other comprehensive income of associates and Joint ventures accounted for using the equity method) ve aes Inte those that, In accordance with other wi not be reclassified subsequently to profit or ss. ‘Will be reclassified si ‘then specie canons wremat) nT ** Both a and b. Neither a nor b. Page 2 of 6 FAR.2642FEXCEL PROFESSIONAL SERVICES, INC. 1 14, Reclassification adjustments do not arise 2, On disposal of avaiable-or-sale financial ass . On disposal ofa foreign operation When When some hedged forecast cash flow affect profit ‘On changes in revaluation surplus A a 2#15.7He accountant for Inga tad 2 (anda) tas eetrminee tha flowing Information forth ye ended 30 Done Froftt or loss: Share ofa compreeraive nce (after tax) of associates ‘Shere of profit (after tax) of associates" Exchange difference gain (net of tax of 7300) on vangatanoforeion ‘operation up to the date sold (i Mareh 2018) Exchange difference gain (net of tax of 2.000) enascesl ot eresn Speraionrecayizes nore f= Bayern cy anes nae evan mrp (net of tax) What ie the tal amount of mer comprenensie Inara for nao he yo ended 30 une 20187 & P26,000 57,000 S psi. & FFHb00 300,000 2’ 29,000 435,000 7,000 24,000 45,000 Use the following Information for the next two questions Tawi2 Company's income statement for the year ended December 31, 208 reparted net profit of P10,000,000- The auditor raised questions about the foliowing amounts that hag been included in the net profit: Unrealized loss on decline in value of ‘available for sale securities 500,008 * Loss on write-off of inventory due to 3 ‘government ban net of tax 4,800,000 & adjustment of profit of prior year net-debit 2,000,000-1 Loss from expropriation of property, net of tax 3,500,000 ay Exchange differences gain on transiating forelan operations 4,500,000 ~ F€ Revaluation surplus realization 1/000,000 - ‘The lose from expropriation was unusual in occurrence In Tawi2’s line of business. C 18. Tawl2 Company's 2018 statement of comprehensive income should report profit at 8. 3,000,000 &. P7,000,000 b. 6,500,000 ¢. 8,500,000 0.17, Tawi2 Company's 2038 statement of comprehensive income should total comprehensive income at a. 12,000,000 ¢: P5,000,000 6. P12,000,000 am me P4,000,000 Be 938.4 dt of ‘s that elther has been cieposed af or is cassiied for sale, and: - 2, Represents 2 separate major line of business or ‘geographical ares of operations. 8. Ie part of a single coordinated plan to dispose of a seperate major line of business or secoemoneegiee ©22. How much should be cg arnount of the 2,50, 009, 002 1, on october 3, 2018, nnen the carr rt asset Binvu company sare, Sa Gemeces segment. TRE the business Haaren it, Z019, a arpa oF In agutien, pio 0 Met wae rontract opliges Biryy Company erst of erie * ston com of ne “Ihe F51500000 8, 2 pecan expanses fo, 2038) Wel re P30,000,000 ene 36,000,000, nom much wil fBefore Income tax, i be reported as 108s ees oma erinatg as business. At DeceTber 32, 2036, Samar hat been competey s0ld. However, the aion "for tre final anc _ complete. sale ore negations a7, postive manner, and fs probable progressing awl be completed within # ye2"- are vig ofthe records elscosed the folowing: ‘Operating loss for the year 099,006.59 Cnerating iss Dor some assets during 2018 $0,000» 7 Expected operating joss in 2019 Cre Expected gein In 2019 on dispesal of division ‘Assuming e 35% tax rete, how much will be reported 3s loss from discontinued operations In Roy's 2016 Income staternent? ‘2, P949,000 b, 909,350 c. 616,850 6. 775,350 Use the following Information for the next two questions. Presented below are the condensed Income statements of Robert Corporation for the years ended December 31, 2018 and 2017: 2018 2017 sales 5,000,000 4,900,000 Cost of goods said tao 2, Gross profit 11,650,000 ~ 3,600,000 ‘Operating expenses —s75.000 ‘Operating Income ‘975,000 ~ 950,000 Gain on sale of division 200.009 7,175,000 350,000 Income tax expense (35%) 332/500 Net income 1750 Re On October 10, 2038, Robert entered into an agreement to sell the assets of one of ts segments. The segment comprises operations and cash flows that can be cleariy distingulshed, operationally and for financial reporting purposes, from the rest of the company, The segment was Sold on December 31, 2018, for P1,750,000. a amount of the segments assets was 1,359,000" the segments covttbuton to Robert's operating income before ea a8 as follows: - any peuzyotwcoma: ee ne 8790 lo C21, For comparative purposes, how) much Is the income from continulng operations in 20172 a. 617,500 c. P564,688 b. PO70/312 a. P694,688 as income from ©. Is @ subsidiary acquired exciusively with a view to discontinued operations in 20187 resale, a. P130,000 . wo teeny | See ee et prepared by the company for 2014 = Balance, 1/1 —— cna atarzganae F200 2 Boy So os sets ; ae nui tare : Mp ‘arising from the derecognition of Profit for 2018 13.680 39.330 financial assets measured at fair value. " ’ 125270 © Impairment losses {incuding reversals of Total impairment losses or = impairment gains) Deductions: determined in accordance with PAS 36. ‘Tnereased depreciation due (0 rien Share of the prof or loss of associates accounted ‘change In estimated life Ps) “aos ig the equity method. Dividends deciared and paid 10,000 wee . Loss on of equipment 3,860 ss from major casualty 22.220 3. Which of the following is shown In the Statement of Laat fom mole Stan h? ae : ‘The adjusted profit of loss that should be repor In 2 Gn cn sal of lant ete The ated rt oe a pa end o of a change in accounting December 31, 2018 Is peices See b mpen rte acon of tare! : re ad cost, ‘8. The “other income" section ‘of Pigeon Company's i paseo je ea of expenses by in Interest income, P15,000 ity in Hole Co. Sagy bursa mares ‘earnings, and P25,000 gain on le of available-for- = benefits, ss is, trensport costs, employee ‘sale securities. Assuming the sale of the securities achases eer seas ee sale asad the current portion of Income tax expense Dy oa of materisis, distribution coms, 710,000, determine the amount of Pigeon's = aie anes oe reclassification adjustment to other comprehensive eco e e %» purchases of materiais, employee . P5,000 ees Depreciation, benefits and advertising costs. Cost of sales, acministrative costs, transport costs, Gistribution costs etc. 5. Separate tine items in an snalysis of expenses by fineton inlude: ie PS Sses ot materals, transport casts, employee gales. Ending Inventory Is twice Te"income after tax of 35% for the benefits, depreciation, extraordinary items. fom ‘istribution costs, current year is P390,000, What is the amount of 9. The expenses other than interest expense of, Ralo Freee tor the current year 40% of cost of sles aay ec af sles. Tmorest expense bs 5% of ‘ra amount of purchases is 120% of cost of much af the a b. Purchases of materials, administrative costs, employee benefits, inventory at the end of the year? éeprecation, taxes. 3. 400,000 . P480,000 ‘c. Depredation, purchases of materiale, employee 5,260,000 ¢, P240,000 benefits and advertising costs. . Cost of sales, administrative expenses, distribution 49, Gary Company had net Income of 700,000 for the ew year ended December 31, 2018 after giving effect to the following events which occurred during the year: 6. The following items were among those that Were The decision was made January 2 to discontinue reported on Cotabato Company's Income statement: ees Goeeyeuenets 72,000,000» _The travel agency segment was sold June 30, Legal and aut fees Rent for office space 6,000,000 ‘© Operating loss from January 1, to June 30 for the Interest on acceptances payable 1,000,000 travel ment Loss on abandoned equipment 500,000 ee Insurance 200,000 + Travel agency assets with a book value of 350,000 were sold for P200,000 ‘The office space Is used equally by the sales and ‘accounting departments. What amount should be Gary's tax rate was 40% for 2018. For the year ended Casofied bs gene's! and administrative expenses? December 34,2018, Gary's. atertax Income from 2. P8,200,000 ¢ P6,200,000 continuing operations was 8. ps'200.000 #5000000 P574000 © #704,000 - P700,000 d. P826,000PROFESSIONAL SERVICES, INC. pi income trom Use the owing formation forte mext ve quesdons, 11, what umount should be reported 2 | an entty epenee eee ‘i Continuing operations? “i gpaiees na gata forthe current year: 5°93 00,808 $2,900,000 wae b. P2,300,000 9,500,000 : recognized in other Se. 11,000,000 What _ehaive income Fr BFE YE” py, 499,000 Imeestegene 4,200,000 3. P2,600,090 & #400000 Gain Fror ins 700,000 b. P3,100,000 eatin Income from oe matibe recycled to profit or 108s? ma income from discontinued operations 00,000 oe 0 93,700,000 Sor ree a 3 e2°300!000 4, 73,1004 me 900, ported a5 net income? foes cx futures contract 414, What amount should be rep a0 eslgnaie as» cash ow nesse 400,000 att saa 000 sGigaay ee ce vaount snould be reported 26 comPrenensive aesumptions Se aoa 15 nee ee 395,500,000 2,600,000 0,008 b. 2,900,000 . 6,100,000 Revaluation surplus 2,500,000 eae (QUESTIONS: ie LECTURE NOTES SUMMARY. ‘As a minimurn, the statement. of comprehensive, income Sa Ot Wor FINANCIAL STATEMENTS ie a minum, Wars ta present ne flowing amounts econ ta ctetement of Brome or tose and Oct — [or Me PON a, ‘Statement of Profit or Loss. or ive income; ‘and oct {&) total other comarenens! e Ro tcan i Sige Z. revenue; excluding the components of other comprehensive income. (e) gains and losses arising from the derecognition of ees Bs er asgets measured at amortised cost; Income comprises Items of IPcOm® (7) nance coe; eer sperges (including reclassifcation adjustments) thes 3 ae ‘or loss of associates and joint oe er rac po Ventures accounted for using the “equity method; Beeston, Te components of ether coMPrENENSVe (my. tax : e paula {) aeingin amount, for, ee total of discontinu : ions (see PFRS 5) tums cat enn be acs to prot ore Sperations ( ’ finan ae ‘on remeasuring avellable-forsalé ar, entity shall disclose the following Items in the fancilastts (285 33) ing and losses on hedging A eemnent of comprehensive Income as allocations of profit e cn od or yr the period: emecmnem mn crac can rans SED or Tse fr he Ps Tor the period altributable to: + sans 0 ae a eee) clea {) non-controlling interests, and = bey tie teak . (il) owners of the parent. by Gaeat comprenensive Income for the period c attributable to: ‘tems that eannot be reciassified inta profit or lass ‘Changes in revaluation surplus (PAS 16 and PAS 38). remeasurements of defined benefit plans (PAS 19). + gains and losses from _ Investments Instruments measured at fair value through other com Income (PERS 9) + for particular Wabilities designated as at fair value ‘through proftt or loss, the amount of the change in falr Value that Is attributable to changes in the liability’s ‘credit risk (PFRS 9) ‘Reclassification adjustments are amounts reciassified to profit or loss in the current period that were recognized in ‘ther comprehensive Income In the current or previous Total comprehensive income is the change in equity during @ period resulting from transactions ‘and other events, ‘other than those resulting from transactions with ‘owners in their ‘a5 owners. Total comprehensive Income cometes al cmponets of prof o ee and of Page 50f6 www.prtc.com.ph (i) non-controlling Interests, and Gi) owners of the parent. ‘The other comprehensive Income section shall present line items for amounts of other comprehensive Income in the period, classified by nature (Including share of the other ‘comprehensive Income of associates and joint ventures accounted for using the equity method) and grouped into those that, In accordance with other PFRS: (@) ral ot be recganiea suamequens toro oF lon a (b)_ will be reclassified subsequently to profit or loss when specific ‘conditions are met. ‘An entity shell present additional line Items, headings and subtotals In the statement(s) presenting prafit ar lass and, other comprehensive income when such presentation is relevant to an understanding of the entity's financial performance. FAR.2642JOFESSIONAL SERVICES, INC. ss ngLeRaO a anyon et aga Seg ee Ma ee conorrene rssh hie resentation of Income and expenses fn ent salt present ai ‘Semen ps (=) sng GS ee eet tens resnans of pont ols af esecane sateen begining with prot or loss "and. atieyng parents of "omer comprehensive income (Gtatement of comprenansive income) All items of income and. © period xbense recognized in © fst be neuen oat Toss unless PFRS requires oF {i ay tial dclose the amount of nce rx relating ‘each component of other comprehensive income, Including reclassification adjustments, elther in the statement of camprehensive Income or i the rates. ‘An entity may present components of other comprehensive Income either: (Q} Pet of retted tax erect, or (0) before related tex effects with ane amount shown for the aggregete amount of income tax relating 0 those eamponents. ‘an entity shall disciose reclassification adjustments relating to components of ather comprehensive Income, Certain items must be disclosed either on the face of the Income statement or inthe notes, if material, Inciud (2) write-downs of Inventories to net realizable value or of plant and equipment to recoverable amount, [bs well Bs reversais of such write-dovin (by restructurings of the activities. of an entity and feversals of any provisions for the coste of restructuring; (c) disposals of terns of property, plant and equipment (d) disposals of Investments; (e) discontinued operations: (1) ligation seltiements; and (g) otner reversals of provisions. ‘ems of income and expense expenses should be analyzed elther: + by nature (raw materials, staffing costs, depreciation, ate,); oF by function (cost of sales, selling, administrative, etc.) tlther on the face of the Income statement or In the notes. af an. enterprise categorizes by function, additional information on the nature of expenses -- at 8 minimum fon, ion, and employee benefits expensa+= must be disclosed, Discontinued operation A saconinued operations » amon fo cy rer has baen dapoved of or mcawaied os hei fr #8 and n represents separate major tne of business oF (Qeographical ares of operations, IE part of single coordinated. plan to dlspove of © Separate major line of business oF geourar ‘operations, OF tea aubeldiary acquired exctuslvely witn 9 view 10 resale peal area of ch and eae csponent cf an entity wit have Been & fcash-generating units th other fash generating unit or 2 group of tahle Being held for use. ‘statement of comprehensive Income presentation wc profit or oss of the discontinued Prigaln or joss recognized on the fs cost to sell of fale value ‘The sum of the post operation and the post measurement to fal value le Gdjustments on the disposal (Group) should be presented 0s a si! Sr the seatement of comprenensive Income. Sloclosure of revenue, expenses, pre-tax profit or 1056, cad income taxes is required eitner In the notes OF On Tea sr ene income statement In a section distinct fror the ang operations, Such dexaled laclosures Must Saath the current and all prior periods presented \* the financial statements. ‘Sample presentaion XYZ GROUP [STATEMENT OF PROFIT OR LOSS FOR THE YEAR ENDED 31 YEAR 2 ‘continuing operations ‘Year2 Revenue x x oa 2) x x Yeart Cost of sales Gross profi, (Other income Distribution costs ‘Administrative expenses Other expenses Finance costs. ‘Share of profit of associates Profit before tax Income tax expense profit for the period from continuing operations Discontinued operations Profit for the period from discontinued ‘operations* Proftt for the period Attributable to: Equity holders of the parent Minority interest “The required analysis mould be given if the notes, @ + end of FAR.2642 - S ana BPR FAR.2642