CPA REVIEW SCHOOL OF THE PHILIPPINES

Manila
FINANCIAL ACCOUNTING AND REPORTING VALIX/VALIX/ESCALA/SANTOS/DELA CRUZ

SELF TEST – FINANCIAL POSITION AND COMPREHENSIVE INCOME

1. An entity provided the following adjusted balances at year-end:
Cash 850,000 Share premium 600,000
Accounts receivable 1,650,000 Retained earnings 1,000,000
Prepaid taxes 500,000 Translation adjustment – debit 500,000
Accounts payable 400,000 Revenue 3,600,000
Share capital 500,000 Expenses 2,600,000
During the current year, estimated tax payments of P500,000 were charged to prepaid taxes. The
entity has not yet recorded income tax expense. There were no differences between financial income
and taxable tax income and the tax rate is 30%. Included in accounts receivable is P500,000 due from
a customer. Special terms granted to this customer require payment in equal semiannual installments
of P125,000 every April 1 and October 1. What amount should be reported as total current assets?
a. 2,450,000
b. 3,000,000
c. 2,325,000
d. 2,125,000

2. An entity provided the following information on December 31, 2021.

Cash in bank, net of bank overdraft of P500,000 in another bank 5,000,000
Notes receivable, net of discounted note of P500,000 4,000,000
Accounts receivable, net customers’ accounts with credit balances P1,500,000 6,000,000
Inventory, excluding unrecorded purchases on account P300,000 in transit FOB
shipping point on December 31, 2021 3,000,000
Bond sinking fund 3,000,000
Accounts payable, net of suppliers’ accounts with debit balances of P1,000,000 7,000,000
Note payable due December 31, 2023 4,000,000
Bond payable due December 31, 2022 3,000,000
Claims from wages covered in a pending lawsuit 400,000
Estimated expenses in redeeming prize coupons 600,000
Accrued expenses 2,000,000

1. What amount should be reported as total current assets on December 31, 2021?
a. 21,300,000
b. 24,800,000
c. 24,000,000
d. 24,300,000

2. What amount should be reported as total current liabilities on December 31, 2021?
a. 12,600,000
b. 15,900,000
c. 16,000,000
d. 12,900,000

3. An entity reported operating expenses other than interest expense for the year at 40% of cost of
goods sold but only 20% of sales. Interest expense is 5% of sales. The amount of purchases is 120%
cost of goods sold. Ending inventory is twice as much as the beginning inventory. The net income
for the year was P2,100,000. The income tax rate is 30%. What amount of sales was reported for the
year?
a. 10,000,000
b. 15,000,000
c. 18,000,000
d. 12,000,000

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4. An entity reported the following liabilities on December 31, 2021.
Accounts payable 2,000,000
Short-term borrowings 1,500,000
Bonds payable due December 31, 2022 3,000,000
Premium on bonds payable 500,000
Mortgage payable, current portion P500,000 3,500,000
Bank loan, due June 30, 2022 1,000,000
The P1,000,000 bank loan was refinanced with a 5-year loan on December 31, 2021. The financial
statements were issued March 1, 2022. What total amount should be reported as current liabilities
on December 31, 2021?
a. 7,500,000
b. 5,000,000
c. 8,500,000
d. 4,000,000

5. An entity reported the following information for the year ended December 31, 2021:
Sales 7,750,000
Cost of goods sold 2,400,000
Administrative expenses 700,000
Loss on sale of equipment 100,000
Sales commissions 500,000
Interest revenue 450,000
Freight out 150,000
Loss on early extinguishment of long-term debt 200,000
Doubtful accounts expense 150,000
At year-end, the entity committed to a plan to discontinue the operations of Underwear Division.
The entity estimated that the division’s operating loss for 2022 would be P500,000. The fair value
of the facilities was P100,000 less than carrying amount on December 31, 2021. The division’s
operating loss for 2021 was P1,400,000 and the division was actually sold for P300,000 less than
carrying amount in 2022. The income tax rate is 30%. What is the net income for 2021?
a. 2,500,000
b. 1,750,000
c. 1,400,000
d. 1,540,000

6. On July 1, 2021, an entity had an equipment with cost of P5,000,000 and accumulated depreciation
of P3,000,000. On that date, the entity classified the equipment as held for sale. On same date, the
equipment had an estimated selling price of P1,300,000, estimated selling cost of P100,000 and
remaining life of 4 years. On December 31, 2021, the estimated selling price of the equipment had
increased to P1,500,000 with estimated selling cost of P50,000. What amount was reported as gain
on reversal of impairment in 2021?
a. 650,000
b. 200,000
c. 250,000
d. 300,000

7. An entity is completing the preparation of the financial statements for 2021. The financial statements
are authorized for issue on March 31, 2022. On March 15, 2022, a dividend of P3,000,000 was
declared and a contractual profit share payment of P1,000,000 was made based on the net income
for 2021. On February 1, 2022, a customer went into liquidation having owed the entity P500,000.
No allowance had been made against this account. On March 20, 2022, a manufacturing plant was
destroyed by fire resulting in a financial loss of P2,500,000. What amount should be recognized in
profit and loss for 2021 to reflect adjusting events after the end of reporting period?
a. 4,000,000
b. 3,000,000
c. 2,500,000
d. 1,500,000
END 6856