POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

COLLEGE OF ACCOUNTANCY
SANTA MARIA, BULACAN

ACCO 20063 – Conceptual Framework and Accounting Standards

Problem Solving Questionnaires

PROBLEM 1.
Aura Corporation’s trial balance contained the following account balances at December 31, 2019:
Accumulated depreciation-Equipment P 900,000
Trading securities 300,000
Prepaid insurance 60,000
Cash 660,000
Inventory 1,800,000
Equipment and furniture 1,080,000
Patent 240,000
Accounts receivable (net) 960,000
Land (held for future business sites) 1,500,000

How much is the total current assets in America’s December 31, 2019 balance sheet? _____________________

PROBLEM 2.
Adelaide Company reported the following items in its December 31, 2019 trial balance.
Accounts payable P2,178,000
Advances to employees 90,000
Unearned rent revenue 576,000
Estimated liability under warranties 516,000
Cash surrender value of officer’s life insurance 150,000
Bonds payable 10,000,000
Discounts on bonds payable 450,000
Trademarks 780,000

How much should Amsterdam report as total liabilities in its December 31, 2019 balance sheet? ________________

PROBLEM 3.
Included in Malta Company’s liability balances on December 31, 2016 are the following:

10% note payable issued on October 1, 2015, maturing on October 1, 2017 P 8,000,000
12% note payable issued on March 2015, maturing on March 1, 2017 16,000,000

Monde’s 2016 financial statements were issued on March 31, 2017. Malta has the discretion to refinance the 10% note payable
for at least twelve months after December 31, 2016. On December 31, 2016, the entire P16,000,000 balance of the 12% note
payable was refinanced on a long-term basis.

What amount of the notes payable should be classified as non-current on December 31, 2016? _________________

PROBLEM 4
Presented below are account balances and related information on December 31, 2019 for Opal Company:

Cash on hand and in bank P2,480,000

Accounts Receivable 800,000
Allowance for Uncollectible Accounts (150,000)
Inventories 1,200,000
Prepaid Insurance 250,000
Total Current Assets P4,580,000
Related information is as follows:

I. The cash balance consists of the following:

 Cash in Bank, net of bank overdraft of P20,000 maintained in a separate bank account and includes a P30,000 check
received from a customer that is dated January 08, 2020. – P400,000
 Cash set aside by the board of directors for the purchase of a plant site – P1,500,000
 Petty Cash (unreplenished expenses are P15,000) – P40,000
 Cash in Bank, for payroll – P540,000

II. The merchandise inventory includes goods held on consignment amounting to P40,000 and goods of P80,000 received on
December 31, 2019. Neither of these items has been recorded as a purchase.

III. The prepaid insurance includes cash surrender value of life insurance in the amount of P50,000.

Determine total current assets at December 31, 2019.

PROBLEM 5.
Shown below are selected accounts and their balances for the Zay Company as of December 31, 2019:

Accounts payable – P980,000; Accounts Receivable – P2,160,000; Allowance for Bad Debts – P250,000; Cash – P224,000;
Wages Payable – P108,000; Trademarks – P450,000; Long-Term Advances to Officers – P1,500,000; Inventory – P830,000;
Income Taxes Payable – P720,000; Notes Receivable (short-term) – P970,000; Bond Redemption Fund – P1,800,000; Bonds
Payable – P5,000,000; Premium on Bonds Payable – P400,000; Treasury Shares – P576,000

How much were the total current assets at December 31, 2019? _____________________

How much were the total current liabilities at December 31, 2019? ___________________

PROBLEM 6.
The accounts of Di Ka Na Mahal Trading Company are listed in alphabetical order:
Accounts payable P 42,070 Office equipment P 73,500
Accounts receivable 46,800 Purchases 409,650
Accumulated depreciation- office equip. 14,250 Purchase discounts 7,005
Accumulated depreciation- store equip. 10,320 Purchase returns and allowances 15,285
Capital, June 30, 2019 110,580 Salary payable 9,180
Cash 18,840 Sales revenue 732,370
General expenses 103,745 Sales discounts 12,525
Interest expenses 10,800 Sales returns and allowances 26,850
Interest payable 4,500 Selling expenses 126,900
Inventory, June 30, 2019 90,090 Store equipment 72,250
Inventory, July 31, 2019 86,085 Supplies 6,525
Notes payable, long-term 45,000 Unearned sales revenue 14,055
Withdrawals 18,480 Allowance for Bad Debts 2,340
Loss on sale of equipment 10,000 Gain on sale of land 20,000

How much is the total income? ______________________

How much is the total expenses? ______________________
How much is the total assets? ________________________
How much is the total liabilities? _______________________
How much is the total current liabilities as of July 31, 2019? ______________________
How much is the capital on July 31, 2019? ______________________

PROBLEM 7.
Grapes Corp. is a manufacturer and retailer of household fixtures. The company’s financial statements for the year ended
December 31, 2016 discloses the following debt obligations. Grapes’ financial statements are authorized for issuance on
March 6, 2017.
 A P150,000 short-term obligation due on March 1, 2017. Its maturity could be extended to March 1, 2019, provided
that Grapes agrees to provide additional collateral On February 12, 2017, an agreement is reached to extend the
loan’s maturity to March 1, 2019.
 A short-term obligation of P3,600,000 in form of notes payable was due on February 5, 2017. The company issued
75,000 ordinary shares for P36 per share on January 25, 2017. The proceeds of the issuance, plus P900,000 cash,
were use used to fully settle the debt on February 5, 2017.
 A long-term obligation of P2,500,000 on December 1, 2016. On December10, 2016, Grapes breaches a covenant
on its debt obligation and the loan becomes payable on demand. An agreement reached to provide a waiver of the
breach on December 11, 2016.
 A long-term obligation of P4,000,000. The loan is maturing over 4 years in the amount of P1,000,000 per year. The
loan is dated September 1, 2016, and the first maturity date is September 1, 2017.
 A debt obligation of P1,000,000 maturing on December 31, 2019. The debt is callable on demand by the lender at
any time.
What amount of current and noncurrent liabilities, respectively, should be reported on December 31, 2016 balance sheet?
_________________ and _____________________

PROBLEM 8.
Star Fruit Company reported the following data for the 2016:
Net sales P9,500,000
Cost of goods sold 4,000,000
Distribution costs 1,000,000
Administrative expenses 1,200,000
Interest expense 700,000
Gain from sale of land 500,000
Income tax expense 800,000
Income from discontinued operations- net of tax 600,000
Unrealized gain on equity investment at FV through OCI- net of tax 1,300,000
Actuarial loss during the year fully recognized- net of tax 300,000
How much is the profit to be reported during the year? ___________________
How much is the total other comprehensive income? ____________________
How much is the total comprehensive income? ______________________

PROBLEM 9.
Coke Company prepared a draft of its 2017 statement of financial position. The draft reported current liabilities totaling
P2,000,000. However, none of the following items were included in this preliminary total at Dec. 31, 2017:
Accounts payable P300,000
Bonds payable due on 2018 500,000
Discounts on Bonds payable 80,000
Dividends payable 160,000
Notes payable due in 2019 400,000
At which amount should Coke’ current liabilities be reported on Dec.31, 2017? ___________________

PROBLEM 10.
Root Beer Company provided the following information at year-end:
Machinery P35,000,000 Intangible assets P7,000,000
Land 20,000,000 Accounts payable 8,000,000
Cash 5,000,000 Wages payable 2,000,000
Accounts receivable 20,000,000 Short-term notes payable 3,000,000
Allowance for bad debts 1,000,000 Bonds payable 40,000,000
Inventories 13,000,000 Premium on Bonds Payable 3,000,000
Prepaid insurance 2,500,000
What is the working capital? (Working Capital = Current asset – Current Liabilities) _____________

PROBLEM 11.
Spag Corp. purchased equipment for P10,000. Other costs incurred were freight charges of P200, repairs of P350 for damage
during installation and installation costs of P225. What is the historical cost of the equipment? _____________________

PROBLEM 12.
On January 1, 2019, Adobo Corporation sold equipment costing P380,000 with accumulated depreciation of P160,000 on
the date of sale. Adobo received as consideration for the sale, a P400,000, non-interest bearing note, due January 1, 2022.
There was no established exchange price for the equipment and the note had no ready market. The prevailing rate of interest
for a note of this type at January 1, 2019 was 10%.
What is the present value of the note on January 1, 2019? ____________________
What is the amortized cost of the note on December 31, 2019? ____________________
What is the total impact to the income statement on December 31, 2019? __________________

Kikiam Retailers purchased merchandise with a list price of P50,000, subject to trade discounts of 20% and 10%, with no
cash discounts allowable. How much is the historical cost of the inventory? ________________