CHAPTER 24

SMALL AND MEDIUM SIZED ENTITIES

Chapter Exercises:
Problem 24-1 MCQ(IFRS)
1. D

2. A

3. D

4. D

.
Problem 24-2 (Philippine SEC)
1. B
2. C
3. C
4. B

Problem 24-3 MCQ(IFRS)

1. D
2. D
3. A
4. C
5. A
CHAPTER 25
SMALL AND MEDIUM SIZED ENTITIES – FINANCIAL STATEMENTS
Problem 25-1 (IFRS)
Required:
SME
Statement of Financial Position
As of December 31, 2020
      ASSETS
Non-current Assets
Property, plant and equipment P 3,520,000
Investment property 2,500,000
Total non-current assets 6,020,000
Current Assets
Inventory 1,180,000
Accounts receivable 1,700,000
Cash and cash equivalents 230,000
Total current assets 3,110,000
TOTAL ASSETS P 9,130,000
      EQUITY AND LIABILITIES
Equity attributable to owners of the
parent
Share capital 1,500,000
Retained earnings 2,690,000
Non-controlling interest 730,000
TOTAL EQUITY 4,920,000
Non-current liabilities
Long-term debt 1,800,000
Environmental restoration provision 280,000
Total non-current liabilities 2,080,000
Current Liabilities
Trade payables 250,000
Accrued payables 200,000
Current portion of the long-term debt 500,000
Interest accrued on long-term debt 230,000
Warranty provision 400,000
Provision for vacation leave 450,000
Dividends payable 100,000
Total current liabilities 2,130,000
TOTAL LIABILITIES 4,210,000
 TOTAL LIABILITIES AND P 9,130,000
EQUITY

Problem 25-2(IFRS)
SME
Statement of Financial Position
As of December 31, 2020
    ASSETS
Non-current assets
Property, plant and equipment:
Vacant land P 320,000
Land and buildings 960,000
Plant 450,000
Equipment 830,000
Investment property 650,000
Intangible assets 1,520,000
Investment in associates 560,000
Deferred tax asset 30,000
Total non-current assets 5,320,000
Current assets
Inventories 1,580,000
Trade and other receivables 120,000
Prepayments 50,000
Cash and cash equivalents 130,000
Total current assets 1,880,000
TOTAL ASSETS P 7,200,000
        EQUITY AND LIABILITIES
Equity attributable to owners of the parent
Share capital 2,500,000
Treasury shares (400,000)
Retained earnings 1,000,000
Other reserves 500,000
Non-controlling interest 300,000
TOTAL EQUITY 3,900,000
Non-current liabilities
Interest-bearing loans and borrowings- 950,000
noncurrent
Government grants – noncurrent 100,000
Deferred revenue 10,000
Other long-term liabilities 210,000
Deferred tax liability 50,000
Long-term provisions 180,000
Total non-current liabilities 1,500,000
Current liabilities
Trade and other payables 960,000
 Interest-bearing loans and borrowings 500,000
Government grants – current 130,000
Deferred revenue – current 60,000
Income tax payable 25,000
Short-term provisions 125,000
Total Current liabilities 1,800,000
TOTAL LIABILITIES 3,300,000
TOTAL LIABILITIES AND EQUITY P 7,200,000

Problem 25-3 (IFRS)

Required:
SME
Statement of Income
For the year ended December 31, 2020
Revenue P 6,000,000
Less: Cost of goods sold (3,700,000)
Gross margin 2,3000,000
Other income 100,000
Total income 2,400,000
Less: Expenses
Employee benefit expense 800,000
Depreciation and amortization 400,000
expense
Other expenses 80,000
Finance cost 120,000
Income before income tax 1,000,000
Less: Income tax expense 300,00
Net Income P 700,000

SME
Statement of Retained Earnings
For the year ended December 31, 2020
Retained earnings – January 2020 P 1,400,000
Correction of error due to under depreciation for the year ended (650,000)
December 31, 2018
Corrected beginning balance 750,000
Add: Net income 700,000
Less: Dividends paid (150,000)
Retained earnings – December 2020 P 1,300,000

Problem 25-4 (IFRS)

1. C
COGS = P1,100,000 + 130,000 = P1,230,000
 P5,500,000 + 100,000 – 1,230,000 – 2,260,000 – 520,000 – 380,000 –
150,000 – 60,000 – 300,000 = 700,000 
2. D
10,000 – 4,000 = 4,000
3. D 
700,000 + 4,000 = 704,000
Problem 25-5 (IFRS)
1. C
6,700,000 + 120,000 – 5,100,000 + 25,000 + 60,000 = 1,805,000
2. A
1,805,000 – 175,000 – 810,000 – 70,000 – 30,000 – 20,000 – 5,000 –
260,000 = 435,000
3. B
2,100,000 + 435,000 – 150,000 = 2,385,000

Problem 25-6 MCQ(IFRS)

1. D
2. A
3. D
4. A
5. A
Problem. 25-7. MCQ. (IFRS)

1. D
2. D
3. A
4. D
5. D

Problem 25-8 MCQ(IFRS)

1. B
2. D
3. C
4. A
Problem 25-9 MCQ (IAA)

1. B
2. B
3. B
4. C
5. B
CHAPTER 26
SMALL AND MEDIUM SIZED ENTITIES – ASSETS
Problem 26-1(IFRS)
1. A           [  150 units X P500 = P75,000 X 0.70 = P52,500  ]
Problem 26-2(IFRS)
      1.    D           [  P1,000,000 – 50,000 = P950,000 X 0.909 = P863,550 + 20,000
= P883,550  ]

Problem 26-3(IFRS)
Journal entries: Cost model:
ENTITY B
Particulars Dr. Cr.
Investment in P1,010,000
associate
        Cash P1,010,000
Cash  P25,000
        Dividend income P25,000

ENTITY C
Investment in associate P1,515,000
      Cash P1,515,000
Cash P200,000
      Dividend income P200,000

ENTITY D
Investment in associate P2,828,000
      Cash P2,828,000
Impairment loss P1,403,000
      Investment in P1,403,000
associate

Equity method:
ENTITY B
Investment in associate P1,010,000
       Cash P1,010,000
Cash P25,000
      Investment in P25,000
associate
Investment in associate P125,000
      Investment income P125,000

ENTITY C
Investment in associate P1,515,000
      Cash P1,515,000
Cash P200,000
      Investment in P200,000
associate
Investment in associate P450,000
      Investment income P450,000

ENTITY D
Investment in associate P2,828,000
      Cash P2,828,000
Investment income P500,000
      Investment in P500,000
associate
Impairment loss P903,000
      Investment in associate P903,000

Fair value model:

ENTITY B
Financial asset – FVPL P1,000,000
        Cash P1,000,000
Cash  P25,000
        Dividend income P25,000
Financial asset - FVPL P300,000
      Unrealized gain - FVPL  P300,000

ENTITY C
Financial asset – P1,500,000
FVPL
        Cash P1,500,000
Cash P200,000
      Dividend income P200,000
Financial asset – P1,400,000
FVPL
      Unrealized gain P1,400,000
ENTITY D
Financial asset – FVPL P2,800,000
      Cash P2,800,000
Unrealized gain – P1,300,000
FVPL
      Financial asset P1,300,000

Problem 26-4(IFRS)
1. D
P1,020,000 – P40,000 = P980,000
2. B

Problem 26-5(IFRS)
1. B
P15,000,000 – P13,250,000 = P1,750,000 – (P2,500,000 X 0.30) =
P1,000,000
2. C
P20,000,000 X 30% = P6,000,000
P750,000/5 = P150,000
P1,000,000/10 = P100,000
P6,000,000 – 150,000 – 100,000 = P5,750,000
3. A
P7,500,000 X 30% = P2,250,000
P15,000,000 + P5,750,000 – 2,250,000 = P18,500,000

Problem 26-6(IFRS)
Journal entries:
      Particulars Dr. Cr.
Date

Jan 1, 2020 Investment property P180,000,000

PPE (land and building)    
20,000,000
    Cash P200,000,000
Investment property P18,000,000
PPE (land and buildings)     2,000,000
    Cash P20,000,000
Investment property P900,000
PPE   100,000
    Cash P1,000,000
 Prepaid expenses P100,000
          Cash P100,000
Profit or Loss-Advertising P500,000
campaign (Operating expenses)
      Cash P500,000
Profit or loss P200,000
      Cash P200,000
June 30, Prepaid taxes P200,000
2020
      Cash P200,000
December Profit or loss - Tax expense P100,000
2020
    Prepaid taxes P100,000
Profit or loss - Tax expense P100,000
    Prepaid taxes P100,000
December Repairs and maintenance P120,000
2020 (Operating expenses)
    Cash P120,000
Cash P270,000
      Refundable deposits – liability P270,000
Cash P1,550,000
    Rent income P1,550,000
Unearned income P50,000
      Rent income P50,000
Depreciation expense - building P353,600
    Accumulated depreciation  P353,600
Investment property P26,100,000
    Gain from change in fair value P26,100,000

Problem 26-7 MCQ(IFRS)

1. B
2. A
3. A
4. A
5. D
6. A
7. D
8. B
9. C
10.C
Problem 26-8 MCQ(IFRS

1. D
2. B
3. B
4. A
 5. D

Problem 26-9 MCQ(IFRS)

1. D
2. C
3. D
4. C
5. D
6. B
7. D
8. B
Problem 26-10 MCQ(IFRS)

1. D
2. C
3. D
4. D
5. D

CHAPTER 27
SMALL AND MEDIUM SIZED ENTITIES – ASSETS
Problem 27-1(IFRS)
Journal entries
Date Particulars Dr. Cr.

January 1, 2020 Land and buildings P50,000,000

    Cash P50,000,000
Land and buildings P1,000,000
    Cash P1,000,000
Land and buildings P200,000
    Cash P200,000
Prepaid taxes P100,000
    Cash P100,000
June 30, 2020 Prepaid taxes P200,000
    Cash P200,000
December 31, Expense – Tax P100,000
2020
      Prepaid taxes P100,000
Expense – Tax P100,000
    Prepaid taxes P100,000
Operating expenses P250,000
    Cash P250,000
 Depreciation expense - P974,000
building
    Accumulated depreciation P974,000

Problem 27-2(IFRS)
January 1, 2020 Cash P1,000,000
    Liability P1,000,000
PPE P2,100,000
  Cash P2,100,000
April 1, 2021 Liability P600,000
    Government grant-income P600,000
December 31, Depreciation expense P78,750
2021
    Accumulated depreciation P78,750
April 1, 2022 Liability P100,000
    Government grant - P100,000
income
December 31, Depreciation expense P105,000
2022
    Accumulated depreciation      P105,000

Problem 27-3(IFRS)
January 1, 2020 Trademark P3,000,000
        Cash P3,000,000
December 31, Amortization expense P300,000
2020
      Accumulated P300,000
amortization
December 31, Amortization expense P300,000
2021
      Accumulated depreciation PP300,000
December 31, Amortization expense P300,000
2022
      Accumulated depreciation P300,000
December 31, Amortization expense P700,000
2003
    Accumulated depreciation P700,000
Impairment loss P900,000
    Trademark P900,000

Problem 27-4 (IFRS)

1. A – 30,000 + 90,000 = P120,000
2. B – 120,000/5 = 24,000 X ½ = P12,000
3. C – 15,000 + 10,000 + 25,000 + 12,000 = P62,000
Problem 27-5 MCQ(IFRS)
1. C

2. A

3. C

4. C

Problem 27-6 MCQ(IFRS)

1. A
2. D
3. A
4. B
5. D

Problem 27-7 MCQ(IFRS)

1. B
2. B
3. D
4. B

5. B
Problem 27-8 MCQ(IFRS)
1. C
2. B
3. B
4. B
5. D

CHAPTER 28
SMALL AND MEDIUM SIZED ENTITIES – LIABILITIES
Problem 28-1
1. D
P10,000,000 X 0.10 X 0.03 = P30,000
P10,000,000 X 0.90 X 0.02 = P180,000
P210,000 X 1.06 = P222,600
P222,600 X 0.50 = P111,300
 P222,600 – P111,300 X 0.95238 = P106,000
Problem 28-2
1. D
P200,000 X 0.20 X 0.70 = P28,000
P100,000 X 0.80 X 0.70 = P56,000
P28,000 + P56,000 = P84,000 X 1.07 = P89,880
2. D
P89,880 X 0.95 = P85,386
Problem 28-3 MCQ(IFRS)
1. A
2. D
3. D
4. B
5. B

Problem 28-4 MQC(IAA)

1. D
2. D
3. C
4. D
5. A

Problem 28-5 MCQ(IFRS)

1. B
2. B
3. C
4. B
5. A
Problem 28-6 MCQ(IFRS)
1. D
2. A
3. A
4. C
5. B
6. C
7. A
8. D
9. B
10. A

Problem 28-7 MCQ(IFRS)

1. D
 2. C
3. C
4. D

CHAPTER 29
SMALL AND MEDIUM SIZED ENTITIES – EQUITY
Problem 29-1 MCQ(IFRS)
1. A
2. C
3. B
4. C
5. B

Problem 29-2 MCQ(IFRS)

1. B
2. C
3. D
4. A
5. C
6. C
7. D
8. D
9. C
10. C
Problem 29-3 MCQ(IFRS)
1. D
2. D
3. B
4. C
5. A
6. D
7. D
8. D
9. C
10. B

CHAPTER 30
SMALL ENTITIES
   Problem 30-1 MCQ(PFRS for SEs)
 1. D

2. D

3. C

4. C

5. C

Problem 30-2 MCQ(PFRS for SEs)

1. D
2. A
3. C
4. A
5. A

Problem 30-3 MCQ(PFRS for SEs)

1. C
2. C
3. D
4. C
5. D
6. A
7. A
8. A
9. D
10.A
Problem 30-4  MCQ(PFRS for SEs)
1. B
2. A
3. C
4. C
5. A
6. C
7. A
8. A
9. C
10.B