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Chapter 3 - The Statement of Financial Position and The Notes To The Financial Statement
Chapter 3 - The Statement of Financial Position and The Notes To The Financial Statement
Chapter 3 - The Statement of Financial Position and The Notes To The Financial Statement
Discussion Question 15
1. C 15. B
2. C 16. B
3. B 17. E
4. E 18. A
5. A 19. B
6. B 20. F
7. E 21. E
8. A 22. B
9. D 23. E
10. E 24. A
11. C 25. F
12. B 26. B
13. A 27. D
14. F (shown on the face of the statement of changes in equity)
Assets
Current assets Note
Cash and cash equivalents P 35,000
Trading securities 61,000
Trade and other receivables (5) 107,000
Inventory 322,000 P 525,000
Non-current assets
Property, plant and equipment (6) P1,483,000
Investment property 1,000,000
Investments in associates 250,000
Intangibles (7) 141,000 2,874,000
TOTAL ASSETS P3,399,000
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Chapter 3 – The Statement of Financial Position and Notes to the Financial Statements
Note 5 – Trade and other receivables
Accounts receivable P115,000
Less allowance for bad debts 8,000
Net trade and other receivables P107,000
Note 7 – Intangibles
Patents P120,000
Less accumulated amortization 22,000 P 98,000
Trademarks P 60,000
Less accumulated amortization 17,000 43,000
Total P141,000
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Chapter 3 – The Statement of Financial Position and Notes to the Financial Statements
Assets
Current assets
Cash and cash equivalents P 116,000
Financial assets held for trading (Note 5) 160,000
Trade and other receivables (Note 6) 308,000
Inventories (Note 7) 985,000
Prepaid expenses 31,000
Non-current assets held for sale (Note 8) 210,000 P1,810,000
Non-current assets
Property, plant and equipment (Note 9) P3,248,000
Other financial assets (Note 10) 339,000
Intangible assets (Note 11) 182,000 3,769,000
TOTAL ASSETS P5,579,000
Current liabilities
Trade and other payables P 580,000
Income tax payable 247,000
Unearned revenues 62,000
Provision for product warranty 73,000 P 962,000
Noncurrent liabilities
Bonds payable (Note 12) 848,000
Shareholders’ equity
Share capital (Note 13) P2,028,000
Additional paid in capital (Note 14) 537,000
Retained earnings 1,204,000 3,769,000
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY P5,579,000
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Chapter 3 – The Statement of Financial Position and Notes to the Financial Statements
Note 8 – Non-current assets held for sale
This classification represents a unit of machinery with carrying amount
of P240,000 and fair value less cost to sell of P210,000. The sale is
expected to be consummated in May 2013.
• Land held for future use, which conventionally was classified as long-term investment,
is not qualified to be reported as Investment Property under par. 9 of IAS 40. Thus,
property held for future development and subsequent use as owner-occupied property
is part of property, plant and equipment.
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Chapter 3 – The Statement of Financial Position and Notes to the Financial Statements
3-3. (DIAMOND COMPANY)
Diamond Company
Statement of Financial Position
December 31, 2012
Assets
Current assets
Cash P 230,000
Financial assets at fair value through profit or loss 320,000
Trade and other receivables (Note 5) 510,000
Inventory 600,000
Prepaid expenses (Note 6) 130,000 P1,790,000
Noncurrent assets
Property, plant and equipment (Note 7) P3,450,000
Financial assets at fair value through OCI 1,030,000
Intangible assets 470,000
Deferred tax asset 70,000 5,020,000
TOTAL ASSETS P6,810,000
Current liabilities
Trade and other payables (Note 8) P1,390,000
Unearned rent 90,000 P1,480,000
Noncurrent liabilities
Bonds payable (Note 9) 1,000,000
Shareholders’ equity
Ordinary share capital, P10 par P1,200,000
Share Premium 1,040,000
Retained earnings 2,300,000
Total 4,540,000
Treasury shares, at cost (330,000)
Accumulated holding gains (losses) – investments
through other comprehensive income 120,000
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY P6,810,000
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Chapter 3 – The Statement of Financial Position and Notes to the Financial Statements
Note 8 – Trade and other payables
Accounts payable P 990,000
Salaries payable 150,000
Taxes payable 250,000
Total P1,390,000
Assets
Current liabilities
Trade and other payables (12) P 1,750,000
Income taxes payable 720,000
Provision for warranties 200,000 P 2,670,000
Noncurrent liabilities
Notes payable (13) 1,000,000
Bonds payable (14) P 4,430,000
Mortgage payable 1,600,000 7,030,000
Total Liabilities P 9,700,000
Shareholders’ equity
Share capital (15) P 1,700,000
Share premium 1,820,000
Retained earnings 3,605,000
Total P 7,125,000
Treasury shares, at cost (180,000) 6,945,000
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY P16,645,000
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Chapter 3 – The Statement of Financial Position and Notes to the Financial Statements
Note 5 – Trading securities
The trading securities, costing P460,000, are reported at market value.
Note 6 – Trade and other receivables
Accounts receivable P1,850,000
Notes receivable (due July 1, 2013) 1,000,000
Allowance for uncollectible accounts (70,000)
Net trade and other receivables P2,780,000
Note 7 – Noncurrent asset held for sale
The non-current asset held for sale represents land that is available for immediate sale
and its carrying amount will be recovered through a sale transaction. The sale is
highly probable as the plan for its sale has already been completed at yearend. Its fair
value less cost to sell at December 31, 2012 was P1,400,000.
Note 8 – Property, plant and equipment
Land P1,400,000
Buildings P4,340,000
Less accumulated depreciation 1,800,000 2,540,000
Equipment P2,960,000
Less accumulated depreciation 1,300,000 1,660,000
Total P5,600,000
Note 9 – Investment property
Land P1,200,000
Building P2,000,000
Accumulated depreciation (300,000) 1,700,000
Total P2,900,000
Note 9 – Other financial assets
Investment in Day Corporation bonds (market, P906,000) P 900,000
Sinking fund for bond retirement 700,000
Total P1,600,000
Note 10 – Intangibles
Patents P820,000
Less accumulated amortization 230,000 P 590,000
Trademarks P520,000
Less accumulated amortization 150,000 370,000
Total P 960,000
Note 11 – Trade and other payables
Accounts payable P 940,000
Wages payable 410,000
Current portion of mortgage payable 400,000
Total P1,750,000
Note 12 – Notes payable
The notes payable was issued on June 30, 2011 and matures on June 30, 2013. As
of December 31, 2012, the company has negotiated with the lender to extend the
maturity date to June 30, 2014.
Note 13 – Bonds payable
Bonds payable P4,000,000
Add premium on bonds payable 430,000
Total P4,430,000
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Chapter 3 – The Statement of Financial Position and Notes to the Financial Statements
Note 14 – Share capital
Preference share capital P 600,000
Ordinary share capital 1,100,000
Total P1,700,000
Note: The entire amount of mortgage notes payable is classified as current liabilities
because as of December 31, 2012, the company has no discretion yet to refinance the
obligation on a long-term basis. The refinancing of the mortgage payable in 2013 is non-
adjusting event that requires disclosure in the notes to the financial statements.
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Chapter 3 – The Statement of Financial Position and Notes to the Financial Statements
OR
Reported total current assets P4,580,000
Bank overdraft 20,000
Cash for purchase of plant site (1,500,000)
Unreplenished petty cash expenses (15,000)
Total current assets at December 31, 2010 P2,995,000
*Alternatively, if the amount of P180,000 was already included in the current liabilities
total of P2,400,000, an adjustment deducting P12,000 from current liabilities is appropriate
in order to bring the provision for damages to the correct amount of P168,000.
Trading Accounts
Cash securities receivable Inventory
Reported amounts P536,000 P500,000 P3,285,000 P3,500,000
(a) Post dated check recorded 80,000
(b) Increase in market value 50,000
(c) Goods shipped FOB destination (180,000) 120,000
(d) Goods out on consignment 135,000
Correct balances, December 31, 2012 P616,000 P550,000 P3,105,000 P3,755,000
Current assets:
Accounts receivable (net)=148,000 – 12,000 P136,000
Citibank current account 98,000
Inventories 217,500
Office supplies 3,500
Total current assets P455,000
Current liabilities:
Accounts payable P124,000
Income tax payable 16,000
Advances from suppliers 150,000
Accrued interest on bonds payable 17,000
Provision for warranties 60,000 367,000
Working capital P 88,000
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Chapter 3 – The Statement of Financial Position and Notes to the Financial Statements
3-11.
1. C 5. B 9. A
2. A 6. C 10. B
3. C 7. A
4. A 8. A
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