CHAPTER 6 STATEMENT OF COMPREHENSIVE INCOME . TECHNICAL KNOWLEDGE To understand the 7 eee nature and usefulness of the income To understand the concept of comprehensive income, profit or loss and other comprehensive income. To identify the components of other comprehensive income. To recognize the reclassification adjustment related to other comprehensive income. To be able to present the income statement following the functional and natural presentation. 113 Scanned with CamScannerN INCOME STATEMENT gtatement showing the finan An income statement Form of an entity for a period of tml performance © erformance of a of income ear} let rent utilizatio nee is also known as the results fs n entity is primarily meas, earned by the entity throws inancial The financie mn of resources, - in terms of the the effective an The financial performa operations. x a period presents the inco i statement fo : ome, The income d net income or loss recognize expenses, gains, losses an during the period. The transaction approac preparation of income sti ' i income or loss requires th, This approach of computing net inco! ires the determination of how much income was earned during the year and how much expenses were incurred in earning the revenue. Information about the financial performance of an entity, in particular its profitability, is useful in predicting the capacity of the entity to generate cash flows from existing resources. shiis the conventional or traditiong) atement in conformity with PFRg Comprehensive income Comprehensive income is the change in equity during a period resulting from transactions and other events, other than changes resulting from transactions with owners in their capacity as owners. Accordingly, comprehensive income includes profit or loss and other comprehensive income. Profit or loss Profit or loss is the total of in ; come less expenses, excluding the components of other comprehensive aeoae This is the " nae Piha, stata amount is the "bottom line" in the traditional incom? An entity may use net i : loss > 2Y USE Nel income or net, loss to describe profit 114 Scanned with CamScannerother comprehensive in Come Other comprehensive ‘rising (Och ° 3 : expense including reclassificays ies items of ognized in profi ion aye ems of i recoe! Profit oF loss gan eUUstmenty ome and ilippine Finanei, S as re, that Philwp, tal Reporting Staged on Permit pal rds, y j, Unrealized gain or loss : 0 i at fair value through o n equit; Y inv ther com, estment measured prehensive ‘ : ine 9, Unrealized gain or loss o : a i at fair value through oth debt investment measured ‘er comprehensive income 3. Gain or loss from translating th i Braemar 'g the financial statements of 4, Revaluation surplus during the year 5. Unrealized gain or loss from derivative contracts designated as cash flow hedge 6. Remeasurements of defined benefit plan Change in fair value attributable to credit risk of a financial liability designated at fair value profit or loss Presentation of other comprehensive income PAI h 82A, provides that the other comprehensive sates é items for amounts of other income section shall present line it for an comprehensive income in the period, classified by nature. The line items for amounts of OCI shall be grouped as: classified subsequentl s are met. to profit or a. OCI that will be reclass! ly loss when specific condition! ». OCI that will not be reclassified subseque’ or loss but to retained earnings: tly to profit 115 Scanned with CamScannersified subsequently to profit or log, OCI that will be reclas: * ting financial statements of 7 a. Gain or loss from transla foreign operation. ; «on derivative contracts designateg b. Unrealized gain or Jos: as a cash flow hedge. Unrealized gain oF Joss on debt investment measured at fair value through OCI. n adjustments are amounts reclassified to the current period that were recognized in income in the current or previous Reclassification profit or loss in the other comprehensive periods. OCI that will be reclassified to retained earnings a. Unrealized gain or Joss on equity investment measured at fair value through OCI Under PFRS 9, the unrealized gain or loss is reclassified to retained earnings upon disposal of the investment. b. Change in revaluation surplus ‘The realization of the revaluation surplus is through retained earnings. c. Remeasurements of a defined benefit plan The remeasurements are not recycled subsequently to profit or loss but may be transferred within equity retained earnings, a. Gain or loss attributable to credit risk of a financial iability designated at fair value through profit or loss The gain or loss m: ithi . ay be recycled sub tly within equity or retained earnings. m sequent 116 Scanned with CamScannerpresentation of compreh, e PAS 1, paragraph 81,p of presenting compreh; Nsive income Tovides th: : at 7 ensive income entity j, Two-statement approach has t i ome, namely, wo options a.. An income state, 7 ; or loss, ‘ent showing the components of profit b. A statement of com) i iy profit or 1 prehensive income beginning with ' loss as shown j i fe 1 in the income statement plus or minus the co; 5 mpons income: Ponents of other comprehensive 2, Single statement approach oe a the combined statement showing the components of prolit oss and components of other comprehensive income in a single statement of comprehensive income. Sources of income a. Sales of merchandise to customers The income from sales shall include all sales to customers during the period minus sales returns, allowances and discounts.. b. Rendering of services Income from rendering of services, among others, includes professional fees, media advertising commissions, insurance agency commissions, admission fees for artistic performance and tuition fees. c. Use of entity resources This income includes interest, rent, royalty and dividend income. 4. Disposal of resources other than products Examples include gain on sale of investments, gain e sale of property, plant and equipment and gain on sale o! intangible assets. 117 Scanned with CamScannerComponents f exP : aie a ense a. Cost of. goo coming a + Distribution | es é Paminis ative pel a. Other expense 1 e, Income tax exP! o . ising entity Cost of : 50009 Beginning inventory 2,000,005 Net purchases ; 2.5000¢ ds vailable for $2 le 300 ocing inventory te Cost of goods sold 2200.09 1,900,009 Gross purchases , Freight in — 150,000 Total . i 2,050,000 Purchase returns, allowances and discounts C 50.000) Net purchases 2,000,000 Cost of goods sold of a manufacturing entity Beginning raw materials 500,000 Net purchases 2,000,000 Raw materials available for use 2,500,000 Ending raw materials (300,000) Raw materials used 2 Direct labor soon Factory overhead 1,300,000 Total manufacturing cost Beginning goods in process ‘ oD Total cost of goods in proc [7,400,000 Ending goods in proces oe yt Cost of goods manufactured 6,400,000 eginning finished goods 1,600,000 Good: i earn ea at for sale 8,000,000 g finished goods 1,500,000 Cost of goods sold 00,000 S50 ( 118 Scanned with CamScannersjassifications of class 'S Of exper Nses pulion. costs OF selling invctly related L0 selling agg?” 8 audvertising r ners. om and deliy dit ONSLittue ¢ us costs which are ; Pry of woo psteibution costs includes oe _ Salesmen’s salaries p, Sales commissions . ‘Traveling and marketi Es ing @ q, Advertising and publicity ine o, Freight out mses f Depreciation of delivery equipme: nt and store equi equipment, Administrative expenses constitute fat . . - CO: sui . pusiness. These ordinarily include all operat ieee related to selling and cost of goods sold. ing expenses not Administrative expenses include: a. Doubtful accounts b. Office salaries and expenses of general executives c. Office supplies expense d. Contributions to charity e f . Professional fees Depreciation of office building and office equipment ‘ Amortization of intangible assets Other expenses are those expenses which are not directly related to the distribution and administrative function. The other expenses are the expenses and losses from peripheral or incidental transactions of the entity. Other expenses include: & Loss on sale of trading investment b. loss on sale of property, plant and equipment. & Loss on sale of noncurrent investment Loss on sale of intangible asset . | & Casualty loss from earthquake, typhoon, hurricane, tsunam), flood, fire, storm surge and other natural disaster Xpropriation loss 119 Scanned with CamScannNo more extraordinary items tity shall F ndates that an entity shall no AS graph 87, specifically me) rdinary items, saaepiee ae income and expense as eee ee ie Premed amy atement or statement of compr in. the income the notes. ms of income and expense are Unusual and infrequent ite e from continuing operations. considered component of incom: from earthquake, ropriati and casualty loss 1 ; Fa and other natiwal disaster are considered ce ponent of income from continuing operations. Separate disclosure 7, i tt when items of income and PAS 1, paragraph 97, provides that earns are material, their nature and amount shall be disclosed separately. Paragraph 98 provides the circumstances that would give rise to the separate disclos - ¢ of items of income and expense. Items of income and expense requiring disclosure a. Writedown of inventory to net realizable value and reversal of such writedown -b. Writedown of property, plant and equipment to recoverable amount and reversal of such writedown c. Restructuring of the activities of an entity and reversal of any provision for the cost of restructuring Disposal of an item of property, plant and equipment e. Disposal of investment f. Discontinued operation g. Litigation settlement Other reversal of Provision 120 Scanned with CamScannerAS 1, paragraph 82, » Provi statement of comprehensive (°° that the line j come are: * tems in the a. Revenue p. Gain or loss from di ae at amortized cost as resem of financial asset ed by PERS 9. Ssset measured 9 Finance cost g. Share of income or loss of i accounted for using the enti sere and joint venture . Income tax expense f Asingle amount comprising discontinued operations . Profit or loss for the period +h. Other comprehensive income ;. Comprehensive income for the period The following items shall be disclosed on the face of the income statement and statement of comprehensive income. Profit or loss attributable to noncontrolling interest and owners of the parent. b. Total comprehensive income attributable to noncontrolling interest and owners of the parent. 1 line items, headings and ome or separate relevant to an An entity shall present additional ¢ of comprehensive inc subtotals in the statemen ive in income statement when such presentation is t understanding of the financial performance of the entity. 121 Scanned with CamScannerForms of income statement i ntity shall present 1 99, provides that an enti ' es Pee ene statement an analysis of expenses ygj the ee unction of expenses or their ; a ificati ither the fu classification based on either melon a nate within the entity, whichever provides information that ig roi and more relevant. Accordingly, the income statement may be presented in two Ways, namely functional and natural. Functional presentation | The functional presentation js the traditional and common form of income statement. } The functional presentation is also known as the cost of goods sold method. ‘This form classifies expenses according to their function as part of cost of goods sold, distribution costs, administrative activities and other activities. Entities classifying expenses by function shall disclose additional information on the nature of expenses, including depreciation, amortization. and employee benefit costs. | | | | | | | Natural presentation This presentation is referred to as the nature of expense method. Under this form, expenses are aggregated according to theit nature and not allocated among the various functions withi the entity. In other words, the natural ed 8 : expenses are no longer classifi cost of goods sold, distributic inistrative and othe Se ion costs, administrative an The expenses which are of the same nature are grouped ™ aggregated and presented as one item, 122 Scanned with CamScannerFunctional income state ment Tacos COMPANY Year ended Statement ecember 31, 2019 |. Net sales Note Cost of goods sold q) | @) 9,000,000 Grose income (5,400,000) | Other income oe | Investment income 8 *so0.000 | ‘Total income 500,000 | 5,000,000 | Expenses: Distribution costs 6) 1, Administrative expenses @)_L'o00,000 Other expenses ,000,000 Finance cost (320,000 cr (8) _ 200,000 2,870,000 Income beiore tax en 2,130,000 Income tax expense 580°000 Net income areratonn Note 1 - Net sales Gross sales 9,300,000 Sales return and allowance (100,000) Sales discount (200,000) Net sales 9,000,000 Note 2 - Cost of goods sold Inventory, January 1 1,500,000 Purchases 6,000,000 Freight in 300,000 T 6,300,000 eet 150,000) Purchase return and allowance ( Purchase discount (250,000) 5,900,000 Good, fi 1 7,400,000 ‘oods available for sale (2,000,000) Inventory, December 31 Barat Cost of goods sold » 123 Scanned with CamScannerNote 3 - Other income Interest revenue Dividend revenue Rent revenue Gain from expropriation Total Note 4 - Investment income 5% Share in net income of associate (25%) Note 5 — Distribution costs Sales salaries SSS and Philhealth - sales Sales commission Advertising Store supplies expense Delivery expense : Depreciation - store equipment Total distribution costs Note 6 —- Administrative expenses Office salaries SSS and Philhealth - office Bonuses Office supplies expense Taxes and licenses Doubtful accounts Depreciation - office equipment Total administrative expenses Note 7 - Other expenses Loss on sale of investment Loss on sale of property Casualty loss from earthquake Total Note 8 - Finance cost Interest expense on'bank loan Interest expense on bonds payable Total finance cost 124 180,000 120,000 100,000 500,000 900,000 500,000 600,000 20,000 180,000 100,000 50,000 250,000 150,000 350,000 650,000 30,000 100,000 70,000 20,000 40,000 90,000 Scanned with CamScannerNatural income Statement Comp, ter D. Statemen ‘scember 31, 2919 Net sales nae ther income Investment income 8 conan otal income __500,070 10,400,000 Bxpenses: Increase in inventory @ Net purchases _ (65,500,000 Employee benefit costs ©) 1:400'000 Gales commission 180,000 Advertising ; 100,000 Supplies expense (™ 120,000 Delivery expense 250,000 Depreciation (8) 240,000 Taxes and licenses 20,000 Doubtful accounts 40,000 Other expenses (9) 320,000 Finance cost (10) 200,000 8,270,000 0 Income before tax 2,130,00 Income tax expense . 580,000 Net income 2,550,000 Note 1 - Net sales 9,300,000 Gross sales ( 100,000) Sales return and allowance { 200,000) Sales discount i $000,000 Net sales ——= Note 2 - Other income 180,000 Interest revenue a Dividend revenue : Ag Oat Rent revenue : a Gain from expropriation 900,000 Total : 125 EL Scanned with CamScannerNote 3 - Investment income i Y Share in net income of associate (25%) Note 4 - Increase in inventory Inventory - December 31 Inventory - January 1 Increase in inventory Note 5 - Net purchases Purchases Freight in Purchase return and allowance Purchase discount ’ Net purchases Note 6 - Employee benefit costs Sales'salaries SSS and Philhealth - sales Office salaries SSS and Philhealth - office Bonuses Total employee costs Note 7 - Supplies expense Store supplies Office supplies Total supplies expense Note 8 - Depreciation Depreciation - store Depreciation - office Total depreciation 126 2,000,009 1 1,500,009 500,000 en 6,000,000 300,000 ( 150,000) (_250,000) 5,900,000 600,000 20,000 650,000 30,000 100,000 50,000 _70,000 120,000 150,000 90,000 240,000 = Scanned with CamScannerNote 9- Other &xpen, Seg Loss on sale of investm, Loss on disposal of Proper y Casualty loss from earthquake 30,000 Total 120,000 170,000 Note 10 - Finance cost 320,000 Interest expense on bank loa, Interest expense on bonds aa 5 . le 0,000 qotal finance cost 150,000 200,000 ich form of income statement? Whi nt? There is no prescribed format. PAS I, paragraph 105, sim, . , simply states that because 7 bs ‘ ecau a ete has merit for different types of Rene : manag is required to select the presentation that is reliable and more relevant. ton that is The cost of goods sold method usuall ‘i relevant information to the users. a) ule prams more Besides, the income statement is simple and easy to understand. Statement of comprehensive income ‘As stated earlier, in addition to the income statement, a statement of comprehensive income is also prepared in order to show the total comprehensive income. The statement of comprehensive income starts with the net income or loss as shown in the income statement plus or minus the components of other comprehensive income. statement is to provide a more nation on financial performance The purpose of this the income as traditionally comprehensive inform Measured more broadly than computed. 127 Scanned with CamScannerlustration pees . q . the preceding illustration, th i in . . : ing the net incor’ sive income May appe, vearate statement of comprehe! at a follows: (PLAR COMPANY hensive Income nt of ‘Compre seat minded December 51, 2019 : 1,551 Net income loss 0,000 OCI to be reclassified to profit or loss: CHEE Foreign currency translation gain i Unrealized loss on derivative h contract designated as cas flow hedge (100,000) 50,000 2,800,000 Comprehensive income Comprehensive income includes the net income or loss for the period plus or minus the components of other comprehensive income. However, the comprehensive income of P1,600,000 is not carried to retained earnings. Only the net income of P1,550,000 is included in the determination of retained earnings: unappropriated. The net other comprehensive income of P50,000 is carried to 'reserves" or shown separately in the statement of changes in equity. 128 Scanned with CamScanneree gingle statement of compreh, * tehe. _ NSive j other option in Presentin, . aa 1088 ae eine nts of other coco POne prepare a single statement of con Prehensiy : ‘ompre} this single statement is the combi, i statement of comprehensive sae sneome state, a atement and Nts Of profit or * Income j, hensive ineeom® 18 to The single statement of comprehe, Ns) functional presentation may appea; ‘ive income following the T as follows: StateneX*MPL atement of Com i Year ended December gy sncom Net sales Cost of goods sold 9,000,000 : 6. Gross income (6,400,000) Other income 3,600,000 stment income 900,000 = k . 500,000 Total income —_—— Expenses: 5,000,000: Distribution costs 1,350,000 Administrative expenses 1,000,000 Other expenses 320,000 Finance cost 200,000 2,870,000 Income before tax 2,130,000 Income tax expense 580,000 Net income 1,550,000 OCT to be reclassified, to profit or loss: Foreign currency translation gain 150,000 Unrealized loss on derivative contract designated as ie (100,000) __ 50,000 cash flow hedge Comprehensive income 1,600,000 129 Scanned with CamScannerQuESTIONS ment. 1, Define a” income state hensive jncome- 2, Define compre fan eo components of comprehensive income? ve 3. What @ profit or loss. 4, Explain the term her comprehensw s of other comprehensive income income. 5. Explain of a 6. What are the component: 7. Explain the presentation of other comprehensive income, 8, Explain the two options of presenting comprehensiyg income. 9. Explain the transaction approach of income determination, 10. What are the sources of income? 11. What are the components of expense? 12. What are the classifications of expenses? 13. Identify items of income and expenses that require separate disclosure. 14. Explain the two forms of income statement. 15. Which form of income statement is required? 130 Scanned with CamScannerpROBLEMS problem 6-1 (IAA) gay Company prov; Masay 'Y Provide the follo ing i gales javentories - January 1, Raw materials * Goods in process Finished goods Inventories - December 31: Raw materials E Goods in process Finished goods purchases Direct labor Indirect labor Superintendence Light, heat and power Rent - factory building Repair and maintenance - m, Factory supplies tised Sales salaries Advertising Depreciation - store equipment Office salaries Depreciation - office equipment Depreciation - machinery Sales returns and allowances Interest income Gain on sale of equipment Delivery expenses Accounting and legal fees Office expenses Earthquake loss Gain from-expropriation of asset Income tax expense achinery Required: ' a. Prepare a statement of cost of good b. Prepare an income statement usin orting notes ment using the “na’ ting notes sold” method with supP' © Prepare an income state expense” method with supp” 181 nformation for 2019. 7,500,000 200,000 240,000, 360,000 280,000 170,000 300,000 3,000,000 950,000 250,000 210,000 320,000 120,000 50,000 110,000 400,000 160,000 70,000 150,000 40,000 60,000 50,000 10,000 100,000 200,000 150,000 250,000 300,000 100,000 320,000 s manufactured g the “cost of goods ture of Scanned with CamScannerTAA) oe . problem 6-2 ¢ ed the following information f, : rovide! ress Company PPS” 9019: i Endless) December 9” 3 rear ended y 25,094 Contribution £25.00 Delivery expens® truck 0,009 Depreciation delivery 35,099 Depreciation - office: | ment 25,009 Depreciation - store equip! 450/004 Dividends paid 50,09) Dividend revenue 30,009 Doubtful accounts 280009 Income tax 145.009 Freight in i Gainon sale of equipment 2 Interest revenue ‘3 i Loeeon sale of trading securities pete Loss from inventory writedown ta 000 Merchandise inventory, January 1 10000 Office salaries 50,000 Purchase discounts 45,000 Purchases 4,600,000 Retained earnings, January 1 : F 350,00 Sales 750,000 Sales returns and allowances 150,000 Sales salaries 600,000 150,000 Store supplies Inventory at year-end was valued at P850,000, P1,000,000 cost less the P150,000 writedown of inventory to net realizable value. fe ona ae me period error by understating Required: Prepare an income statement with supporting. notes Mica ii a Scanned with CamScannera problem 6-3 (AICP, Aa na Compa “pted) Da ary an oo vied organize din! les of Pygq mize a property, plant a pat Value may 1, 20 cash of P1,000,000, ‘Wipment valued ine aa led a exchang, following dat, *© P3,000,009 oral athe A summarize acti + “tivities fon 1, Net income for the Current, for the year, g, Raw materials on ha, Year wag p- 2. : nd 8 1,00 25% of raw materials marek December 31 pa 3, Manufacturing costg as dintitea equal to as follows: Materials. used Direct labor a Factory overhead one includes depreciation of building, P100,000) 4, Goods in process remaining j : g in the f, December 31 were equal to 33 Tisseeriiere de finished and transferred to stock ee 5. Finished goods remaining in stock were e 1 to 25% the cost of goods sold. cee eee . Expenses were 30% of sales, 6. 7. Cost of goods sold was-150% of the expenses total. 8. Ninety percent of sales were collected. The balance was considered collectible. 9. Seventy five percent of the raw materials purchased were paid for. There were no expense accruals or prepayments at the end of the year: Required: eB: Prepare an income statement for the year ended December 31, 2019. nt of financial position on December b. Prepare a statemel 31, 2019. | 138 I Scanned with CamScannerProblem 6-4 (AA) sea to 20 sompany provided the following al : Youth C Youth 9070 bee Sale! 5,750,000 Transportation in 1,500,000 Inventory beginning 1,400,000 Inventory ending 340,000 Uninsured flood loss 400,00) Officers’ salaries cay Depreciation - building evan Office supplies ar Miao Depreciation - store equipme pe Store suppl 8 poniany Sales salaries pnviany Sales returns and allowances Totes Purchase discounts poooad Income tax expense Required: Prepare an income statement. Problem 6-5 (IFRS) Rose Company provided the following data for 2019: Dividend income from investments 9,200,000 Distribution income from trusts 500,000 Interest income on deposits 700,000 Income from bank treasury bills 100,000 Unrealized gain on forward contract designated as cash flow hedge 400,000 Income from dealing in securities and derivatives held for trading 600,000 Writedown of securities and derivatives held for trading 150,000 Other income 250,000 Finance cost 300,000 Administrative staff costs 3,800,000 Sundry administrative costs 1,200 000 Income tax expense 1'700,000 Required: Prepare a single statement of comprehensive income. 134 Scanned with CamScannerproblem 6-6 (IFRS) ne adjusted trial ba), the following account ance of Dahlia 8 c : on December 31, gory, ineluded gales interest revenue Gain sale of eatipment mpbo;o00 valuation surplu: < 0,00 gevaluaton supe dating the yea 100 Cost of goods sold 1,200,000 Finance cost 6. 350,000 pistribution costs Sen Administrative expenses 500,000 Translation loss on foreign operat 300,000 Income tax expense ae 200,000 950,000 Required: Prepare a single statement of comprehe: year ended December 31, 2019. geal Problem 6-7 (IFRS) The adjusted trial balance of Lotus Company included the following accounts on December 31, 2019: Sales . 9,750,000 Share of profit of associate 150,000 Other income 300,000 Decrease in inventory of finished goods 250,000 Raw materials and consumables used 3,500,000 Employee benefit expense 1,500,000 Translation gain on foreign operation 300,000 Depreciation : 450,000 Impairment loss on property 800,000 Finance cost 360,000 Other expenses 450,000 Income tax expense : 900,000 Unrealized gain on option contract designated as cash ssn flow hedge Required: Prepare a single statement of comprehensive income for the year ended December 31, 2019. 135 Scanned with CamScannerpted) ting expenses as distributi, n Problem 6-8 (AICPA Adal rted operal “ker Company YePO'™ tive, Earl or ‘administrativ ae tthe end of the current ya, The adjusted trial balance i ‘accounts: included the following esP° a 5 , 50, ‘Accounting and legal fees rego Advertising 750900 Freight out 600,09 Ines ofangtenm investment ae ‘icers’ salaries rend) Ser el tng insurance 10 Rent for office space ann 100 Sales salaries and commissions 400.000 One-half of the rented premises 18 occupied by the sales department. What total amount should be included in distribution expenses for the current year? a. 6,000,000 b. 3,650,000-. c. 4,550,000 d. 4,900,000 Problem 6-9 (AICPA Adapted) Grim Company incurred the following costs during the current year: Property taxes 250,000 Freight in 1,750,000 Doubtful accounts 1,600,000 Officers’ salaries 1,500,000 Insurance 850,000 Sales representative salaries 2,150,000 Interest on inventory loan 500,000 1,000,000 Research and development expense What amount of these costs should be reported as administrative expenses? 2,600,000 38,350,000 . 5,200,000 4,200,000 Be op 136 Scanned with CamScanner| problem 6-10 (IAA) ndo Company reported t,, roaits in selected acco, he follow: unt: ing t . Saftey Closing enuecbits entries wy ‘and total °8 Were posted: Materials Debits Credits oods in process 600,000 Geerial purchases 500,000 20000) purchase discount 2,500,000 2,500,005 qransportation in 100,000“ to0,o00 pirect labor 200,000 200,000 Manufacturing overhead $000,000 3,000,000 finished goods 500,000 150,000 700,000 400,000 _ What is the cost of raw materials used? _ 2,800,000 2,400,000 3,200,000 _ 2,600,000 Boop 9. What is the cost of goods manufactured? a. 6,900,000 b. 7,200,000 c. 7,000,000 d. 7,400,000 3. What is the cost of goods sold for the year? 6,900,000 7,400,000 7,100,000 7,000,000 Peep 137 Scanned with CamScannerLCPA Adapted) 11 (PHI Problem 6: 1 . ny provided the following information, for _ Melissa Compa! current year! 00,0 Beginning inventory ‘om Freight in 20a Purchase returns soueo Ending inventory 1,250,095 Distribution costs 250, iy Sales discount 50, ix times the distribution costs, ‘The cost of goods sold is 5} 2 What is the amount of gross purchases? 6,500,000 6,700,000 8,000,000 . 8,200,000 Problem 6-12 (PHILCPA Adapted) Gianina Company reported the following information for the Boop current year: Inventory, January 1 2,000,000 Purchases 7,500,000 Purchase returns and allowances 500,000 Sales returns and allowances 750,000 Inventory at December 31 2,800,000 20% Gross profit rate on net sales What is the amount of gross sales for the current ye!” a. 7,750,000 b. 8,500,000 c. 7,000,000 d. 9,125,000 138 Scanned with CamScannerproblem 6-13 (AICPA Aa. . ‘apteg porpe Company reported net j ) ’ Reome of Py, ' : 1410, e auditor raised quest; 000 for the : i jhat bad been included in sat about the come: ealized loss on financial] ass nr through other comprehen St at fair y in on early retirement of bong noe = a Adjustment of profit of prior yeay posi 2.200.000 indepreciation, net of tax eiteget °°? ees jesstrom fire ( 750,000; * i ; } Gain from change in fair va} i 1 cnditriokof financial iaegttbutablety 400.00 regi lesignated : 500,000 What is the adjusted net Meome for the current year? a. 6,500,000 i . 7,200,000 ¢. 8,200,000 d. 8,700,000 Problem 6-14 (AICPA Adapted) Pearl Company reported income before tax of P5,000,000 for the current year. The entity owned 40% of Cinn’s share capital. The auditor questioned the following amounts that had been included in income before tax: 1,600,000 ity i i inn Compan: Equity in earnings of Cini pany 320,000 Dividend received from Cinn Company Adjustment of profit of prior year _ _ for arithmetical error in depreciation (1,400,000) What amount should be reported as income the current year? before tax for a 3,400,000 b. 4,680,000 & 4,800,000 4 6,080,000 139 Scanned with CamScanner15 (IFRS) Problem 6- ; vided the followin! g information for the Divina Company pro’ current year: ' ati 0 Income from continuing opera ro Income from discontinued oper ie FVPL Hen Unrealized gain 07 financial ai ia rvocl : ns equity 1m 000,099 Unrealized loss on eat yavestment-FVOCI 1200.40 Unrealized gain on t designated as a futures contrac Unrealized gain on cash low hedge ‘00g ‘Translation loss on foreign opera iin Net remeasurement gainon defined benefit plan 600,009 Litcon eredit risk of a financial liability at FVPL 800 0 2,500,000 Revaluation surplus during the year 1. What amount should be reported as net income for the current year? . 4,000,000 . 4,500,000 5,300,000 4,800,000 Boop 2. What net amount should be reported as OCI for the current year? a. 4,000,000 b. 3,500,000 c. 3,200,000 d. 700,000 3. What amount should b i \ e reported a sive income for the current year? a 5,200,000 7,700,000 8,500,000 - 7,200,000 pore 140 Scanned with CamScannerproblem 6-16 Multiple Choice (atc 1, The term camprehensine ining ‘A Adapted) . Must be reported on b. Includes all chan, pane face Of the income stat from investments by ang quit, except theege atement. c, Is the net change in gw, re tibutions ownerg, in : eaan : d. Is synonymous with the term nel aot the Period. ie. f the followin, 2, Allo +8 Components of income are reclassified to wr [other comprehensi Be me Profit or Joann oo oP ensive a. Gain from translatin, 7 fren operation ne the financial statements of a b. Loss from reméasuring debt ; c. The effective portion ci seunvestment at FVOGL instrument in a cash flow hedge oF Joss on ees FT : oe d. Gain o1 remeasuring equity investment at FVOCI 3, Which component of other compreher i . sive ii be reclassified to retained earnings? income should a. Revaluation surplus b. Ce ee of defined benefit plan c ange 1n fair value attributable to credit ri i liability designated at FVPL, "financial d. All of these components of OCI should be reclassified to retained earnings Why is reclassification adjustment used when reporting other comprehensive income? a. To reclassify an item of comprehensive income as another item of comprehensive income b. To avoid double counting of items ¢. To make net income:equal comprehensive income 4. To adjust the income tax effect of OCI 5. The components of OCI include all, except a. Unrealized gain on derivative contract designated as cash h F b. Loss a CUB sting the financial statements of a foreign operation & Actuarial gain on defined benefit plan 4 Dividend paid to shareholders 141 Scanned with CamScanner6. Which is not a component of OCI? a. Foreign currency translation poked b. Unrealized gain on financial asset eld. for tra i c. Deferred loss on derivative financial instry® designated as cash flow hedge Mh d. Change in revaluation surplus eng 7. Which is not a component of OCI? Remeasurement of defined benefit plan Treasury share at cost ' Foreign currency translation adjustment, . Unrealized gain on equity investment Teasureg FVOCI at pee 8. Which of the following options for dis Playing oy comprehensive income is preferred? her a. Acontinuation from net.income in the income Stateme b. A separate statement that begins with net income ™ c. In the statement of changes in equity , d. Acontinuation from net income in the income nD Statement or a separate statement that begins with ne’ 3 t income 9. How should exchange gain or loss resulting from foreign currency transaction be accounted for? a. Included as component of income from continuing operations for the period in which the rate changes b. Included as component of other comprehensive income for the period in which the rate changes Included in the statement of financial position ¢. d, Included in net income for gain but deferred for loss 10. Unusual and infrequent gain should be presented as a, Component of income from continuing operations, bt not net of applicable income tax. Component of income from continuing operations of applicable income ‘tax, Extraordinary item . Prior period error, net of applicable income t@* 142 “Scanned with CamScanner