PROBLEM 1:

BOOMERANG INC., is a manufacturer and retailer of household furniture. Your audit of the
company’s financial statements for the year ended December 31, 2012, discloses the
following debt obligations of the company at the end of its reporting period. Boomerang’s
financial statements are authorized for issuance on march 6, 2013.

a. A P150,000 short – term obligation due on March 1, 2012. Its maturity could be
extended to March 1, 2015, provided Boomerang agrees to provide additional collateral.
On February 12, 2013, an agreement is reached to extend the loan’s maturity to March 1,
2015.
b. A short-term obligation of P3,600,000 in the form of notes payable due February 5,
2013. The company issued 75,000 ordinary shares for P36 per share on January 25,
2013. The proceeds from the issuance, plus P900,000 cash, were used to fully settle the
debt on February 5, 2013.
c. A long – term obligation of P2,500,000 on December 1, 2012. On November 10, 2012,
Boomerang breaches a covenant on its debt obligation and the loan becomes payable on
demand. An agreement is reached to provide a waiver of the breach on December 11,
2012.
d. 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, 2012, and the first maturity date
is September 1, 2012, and the first maturity date is September 1, 2013.
e. A debt obligation of P1,000,000 maturing on December 31, 2015. The debt is callable on
demand by the lender at any time.

1. What amount of current liabilities should be reported on the December 31, 2012,
statement of financial position?
A. P8,250,000 C. P4,750,000
B. P5,570,000 D. P3,750,000
2. What amount of noncurrent liabilities should be reported on the December 31, 2012
statement of financial position?
A. P5,500,000 C. P6,500,000
B. P1,000,000 D. P7,500,000

PROBLEM 2:
The data are from the records of MANOR INC. on December 31, 2012:

Accounts payable P 680,000

Cash balance, ABC Bank 1,240,000
Cash overdraft with XYZ Bank 80,000
Customer’s accounts with credit balances 25,000
Dividends in arrears on preference shares 400,000
Employees’ income tax payable 100,000
Estimated warranty payable 50,000
Estimated premium claims outstanding 90,000
Income tax payable 400,000
Notes payable (issued in 2012 maturing in 20 semi – annual
installments beginning on April 1, 2013) 4,000,000
Salaries payable 400,000

The amount to be shown as total current liabilities on Manor statement of financial position at
December 31, 2012, is
A. P2,225,000 C. P2,625,000
B. P2,025,000 D. P2,145,000
PROBLEM 3:
SAI CORP. records its purchases at gross amounts but wishes to change to recording
purchases net of purchase discounts. Discounts on purchases recorded from January 1, 2012
to December 31, 2012, totaled P80,000. Of this amount, P8,000 is still available in the
accounts payable balance. The balance in Sai’s accounts as of and for the year ended
December 31, 012, before conversion are:

Purchases P 4,000,000
Purchase Discounts 32,000
Accounts payable 1,200,000

1. The amount of purchase discounts lost to be recognized is

A. P8,000 C. P32,000
B. P0 D. P40,000
2. The accounts payable balance should be reduced by
A. P8,000 C. P32,000
B. P80,000 D. P40,000
3. The purchases account should be reduced by
A. P32,000 C. P40,000
B. P80,000 D. P8,000
4. The entry to record the conversion is
A. Accounts payable 80,000
Purchases 80,000
B. Purchase discounts lost 32,000
Purchases 32,000
C. Purchase discounts lost 40,000
Purchase discounts 32,000
Accounts payable 8,000
Purchases 80,000
D. Purchase discounts lost 32,000
Account payable 8,000
Purchases 40,000