1.

Darwin Company provided the following information at year-end:

Cash 300,000
Accounts Receivable 1,200,000
Inventory, including inventory expected in the ordinary
course of operations to be sold beyond 12 months
amounting to P700,000 1,000,000
Prepaid expenses 100,000
Financial asset held for trading 200,000
Equity investment at fair value through other
comprehensive income 800,000
Deferred tax asset 150,000

What amount should be reported as total current assets at year-end?

a. 2,800,000
b. 2,550,000
c. 3,600,000
d. 2,100,000

Solution 1-1 Answer a

Cash 300,000
Accounts Receivable 1,200,000
Inventory 1,000,000
Prepaid expenses 100,000
Financial assets held for trading 200,000

Total current assets 2,800,000

In the absence of statement to the contrary, equity investment at fair value through other
comprehensive income shall be classified as noncurrent.

PAS 1 and PAS 12 provide that deferred tax asset is a noncurrent asset.

2. Petite Company reported the following current assets on December

31 , 2016:

Cash 5,000,000
Accounts receivable 2,000,000
Inventory, including goods received on
Consignment P200,000 800,000
Bond investment at fair value through
other comprehensive income 1,000,000
Prepaid expenses, including including a deposit of P50,000
made on inventory to be delivered in 18 months 150,000

Total current assets 8,950,000

Cash in general checking account 3,500,000
Cash fund to be used to retire bonds payable in 2018 1,000,000
Cash held to pay value added taxes 500,000

Total cash 5,000,000

What total amount of current assets should be reported on December 31, 2016?

a. 6,750,000
b. 6,700,000
c. 7,700,000
d. 7,750,000

Solution 1-3 Answer b

Cash (3,500,000 + 500,000) 4,000,000

Accounts Receivable 2,000,000
Inventory (800,000 – 200,000) 600,000
Prepaid expenses (150,000-50,000) 100,000

Total current assets 6,700,000

The goods received on consignment should be excluded from inventory.

The cash fund to be used to retire bonds payable in 2018 should be classified as noncurrent.

The bond investment at fair value through other comprehensive income is a noncurrent asset.

3. Gar Company reported the following liability account balances on December 31, 2016:

Accounts payable 1,900,000

Bonds payable, due December 31, 2017 3,400,000
Discount on bonds payable 200,000
Deferred tax liability 400,000
Dividends payable 500,000
Income tax payable 900,000
Note payable 600,000

The deferred tax liability is based in temporary differences that will reverse in 2018.

On December 31, 2016, what total amount should be reported as current liabilities?

a. 7,100,000
b. 6,700,000
c. 6,500,000
d. 6,900,000
Solution 1-10 Answer c

Accounts payable 1,900,000

Dividends payable 500,000
Income tax payable 900,000
Bonds payable 3,400,000
Discount on bonds payable (200,000)

Total current liabilities 6,500,000

Under PAS 1 and PAS 12, a deferred tax liability should be classified as noncurrent.

The bonds payable minus the discount on bonds payable should be classified as current because the
bonds are due within one year.

The dividends payable and income tax payable are normally classified as current.

The note payable is classified as noncurrent because it matures in more than one year from the end of
reporting period.

4. Burma Company disclosed the following information:

Accounts payable, after deducting debit balances

in suppliers’ accounts amounting to P100,000 4,000,000
Accrued expenses 1,500,000
Credit balances of customers’ accounts 500,000
Stock dividend payable 1,000,000
Claims for increase in wages and allowance by
employees of the entity, covered in a pending lawsuit 400,000
Estimated expenses in redeeming prize coupons 600,000

What amount should be reported as total current liabilities?

a. 6,700,000
b. 6,600,000
c. 7,100,000
d. 7,700,000

Solution 1-12 Answer a

Accounts payable (4,000,000 + 100,000) 4,100,000

Accrued expenses 1,500,000
Credit balances in customers’ accounts 500,000
Estimated liability for coupons 600,000

Total current liabilities 6,700,000

The debit balances in suppliers’ accounts are not “netted” against accounts payable but should be
reported as current asset.

The stock dividend payable is not an accounting liability but presented as part of shareholders’ equity as
an additional to share capital.

The claims for increase in wages and allowance should be disclosed as contingent liability.

5. United Company provided the following current assets and shareholders’ equity on December 31,
2016:
Cash 600,000
Financial assets at fair value through profit or loss,
including cost of P300,000 of United Company
shares 1,000,000
Accounts receivable 3,500,000
Inventory 1,500,000

Total current assets 6,600,000

Share capital 5,000,000

Share premiuim 2,000,000
Retained earnings 500,000
Total shareholders’ equity 7,500,000

What amount should be reported as total shareholders’ equity?

a. 7,200,000
b. 7,500,000
c. 7,800,000
d. 5,200,000

Solution 1-17 Answer a

Share capital 5,000,000
Share premium 2,000,000
Retained earnings 500,000
Treasury shares, at cost (300,000)
Total shareholders’ equity 7,200,000

The treasury shares are excluded from financial assets at fair value through profit or loss but should be
reported as a deduction from shareholders’ equity.

Cash 600,000
Financial assets at fair value (1,000,000 – 300,000) 700,000
Accounts receivable 3,500,000
Inventory 1,500,000

Total current assets 6,300,000

6. Alena Company provided the following information at year-end:

Property, plant, and equipment 35,000,000

Land 20,000,000
Cash 5,000,000
Accounts receivable 20,000,000
Allowance for doubtful accounts 1,000,000
Merchandise inventory 13,000,000
Prepaid insurance 2,500,000
Financial asset at fair value through other
comprehensive income 7,000,000
Accounts payable 8,000,000
Wages payable 2,000,000
Short-term note payable 3,000,000
Bonds payable 40,000,000
Premium on bonds payable 3,000,000

What is the working capital?

a. 46,500,000
b. 33,500,000
c. 26,500,000
d. 35,500,000

Solution 1-22 Answer c

Current assets:
Cash 5,000,000
Accounts receivable 20,000,000
Allowance for doubtful accounts (1,000,000)
Merchandise Inventory 13,000,000
Prepaid insurance 2,500,000 39,500,000

Current liabilities:
Accounts payable 8,000,000
Wages payable 2,000,000
Short-term note payable 3,000,000 13,000,000

Working Capital 26,500,000