Theories

1. The statement of financial position is useful for all of the following, except:
a. Compute rate of return
b. Analyze cash inflows and outflows for the period
c. Evaluate capital structure
d. Assess future cash flows
2. The statement of financial position
a. Omits many items that are of financial value
b. Makes very limited use of judgement and estimate
c. Uses fair value for most assets and liabilities
d. All choices are correct
3. An entity shall classify an asset as current under all of the following conditions, except:
a. The entity expects to realize the asset or intends to sell or consume it within the
entity’s normal operating cycle.
b. The entity holds the asset for the purpose of trading.
c. The entity expects to realize the asset within twelve months after the reporting
period.
d. The asset is cash or a cash equivalent that is restricted to settle a liability for more
than twelve months after the reporting period.
4. In presenting a statement of financial position, an entity
a. Must make the current and noncurrent presentation
b. Must present assets and liabilities
c. Must choose either the current and noncurrent or the liquidity presentation,
meaning free choice of presentation
d. Must make the current and noncurrent presentation, except when a presentation
based on liquidity provides information that is reliable and more relevant.
5. A financial liability due within twelve months after the reporting period shall be classified
as noncurrent
a. When it is refinanced on a long-term basis before the issue of financial statements
b. When the entity has no discretion to refinance for at least twelve months.
c. When it is refinanced on a long-term basis after the end of the reporting period.
d. When it is refinanced on a long-term basis on or before the end of reporting
period.
6. All of the following components of OCI should be reclassified to profit or loss, except:
a. Gain or loss from translating the financial statements of a foreign corporation
b. Gain or loss from remeasuring debt investment at FVOCI
c. The effective portion of gain or loss on hedging instruments in a cash flow hedge.
d. Gain or loss on remeasuring equity investment at FVOCI.
7. The two-statement approach of presenting comprehensive income is preparing
a. A comparative statement of comprehensive income
b. A combined statement of comprehensive income and retained earnings
c. A combined income statement and a statement of changes in equity
d. A separate income statement and a separate statement of comprehensive
income
8. An shall present an analysis of expenses using a classification based on
a. The nature of expenses
b. The function of expenses
c. Either the nature of expenses or the function of expenses, whichever provides
information that is reliable and more relevant
d. Either the nature of expenses or the function of expenses, whichever the entity
would prefer to present
9. What is the purpose of reporting comprehensive income?
a. To report transaction with owners
b. To report a measure of overall entity performance
c. To replace net income with a better measure
d. To combine income from continuing operations with income from discontinued
operations
10. The income statement would help in which of the following?
a. Evaluate liquidity
b. Evaluate solvency
c. Estimate amount, timing, and uncertainty of future cash flows
d. Estimate future financial flexibility
Problem 1
The following were the accounts obtained from ABC company’s unadjusted trial balance as of
December 31, 2021:

Cash in bank, restricted for payroll P 750,000

Cash in bank, restricted for the
purchase of land expected
to be disbursed in February 2022 1,000,000
Cash in bank, PNB 400,000
Accounts receivable, net of credit balance of P10,000 1,800,000
Subscriptions receivable 150,000
Petty cash fund, net of P10,000 check
pertaining to PCF custodian 70,000
Prepaid insurance, net of P50,000 cash surrender value 220,000
Investment in stocks, at cost 420,000
Property, plant and equipment, net 2,500,000
Investment property, net 800,000
Accounts payable 120,000
Notes payable, payable in June 2022 370,000
Bonds payable 3,000,000
Loans payable 2,100,000
Share dividends payable 180,000
Deferred tax asset, net of
deferred tax liability of P120,000 80,000
Suppliers debit balance 50,000
Premium on bonds payable 15,000

Other information:
• PNB is in the process of liquidation as of December 31, 2021
• The property, plant and equipment include the following:
o The warehouse with carrying value of P200,000 is classified as held for sale.
o Land held for undetermined future use amounted to P400,000. The fair value of
the land is P435,000.
• The investment in stocks is composed of the following:
o 12% investment in SM held for trading P220,000, fair value at 12/31 is P250,000.
o 19% investment in Ayala not held for trading, irrevocably designated at OCI
P150,000, fair value at 12/31 is P120,000.
o 20% investment in PLDT not held for trading P80,000, fair value at 12/31 is P100,000.
• The notes payable due in June 2022 was refinanced on October 1, 2021 for 14 months
from date of refinancing.
• The loans payable is payable in 3 equal annual installments starting on September 5,
2022.
• The investment property as per trial balance is properly measured using the fair value
method.
Questions:
1. How much is the noncurrent asset of the company as of December 31, 2021?
2. The total property, plant and equipment as of December 31, 2021 amounted to?
3. The current liabilities as of December 31, 2021 amounted to?
4. The total non-current liabilities as of December 31, 2021 amounted to?
5. The total current assets as of December 31, 2021 amounted to?
Problem 2
The following were taken from the records of Junathan Corporation:
Gain on sale of equipment P 150,000
Sales revenue 2,800,000
Cost of goods sold 1,250,000
Purchase discount lost 50,000
Sales discount forfeited 15,000
Interest expense 120,000
Amortization of premium 30,000
Amortization of patent 70,000
Income tax expense 150,000
Increase in deferred tax asset 45,000
Loss on sale of patent 25,000
Freight-out 12,000
Rental of head office 78,000
Depreciation of delivery trucks 192,000
Utilities used in the head office 42,000
Salaries of the admin staff 58,000
Depreciation of PPE 145,000
Increase in fair value of financial assets held for trading 75,000
Decrease in fair value of derivatives designated at fair value hedge 68,000
increase in fair value of investment property measured at fair value 34,000
Decrease in revalued amount of PPE 180,000
Decrease in the measurement of the defined benefit obligation 27,000
Actual interest is less than interest income of the defined benefit asset 5,000

Question:
1. How much is operating income of the entity?
2. Total finance costs amounted to?
3. The selling costs of the company amounted to?
4. The other comprehensive income that will be subsequently recycled to profit or loss
amounted to?
5. The total comprehensive income amounted to?