PROBLEMS Problem 3-1 Multiple choice ¢ 1. Which is a purpose of notes t0 fin pe oo a. b. Gs d. PAS 1) ancial statements? i is of preparati information about the basis o! ion a Picts toienta and accounting policies eed To disclose the information. pedniee ae, S not presented elsewhere in the financial statements. To provide additional information not presented but ir presentation. sary for a fait All of ies can be considered a purpose of the notes, What is the first item in presenting the notes? a. b. 3 di . An entity whose financial statements comply with PFRS Statement of compliance with PFRS Rete Other disclosures, such as contingent liabilities and unrecognized contractual commitments Supporting information for items presented on the face of the financial statements 3 Summary of significant accounting policies. shall a. b. ce Make an explicit statement of compliance in the notes. Make an unreserved statement of compliance in the notes. Make an explicit and unreserved statement of compliance in the r “ d. PERS. . An entity is r nonfinancial ile choice (IAA) Problem 3-3 Multipl 4 . i notes 1, Which statement is incorrect regarding mancia| statements? a. IFRS requires pect isaggregation of inver . b. fine Dra a maturity analysis fone receivables c. IFRS requires that all notes shou! ¢ clear, simpl, to understand and nontechnical in nature. d. All of the choices ific note disclosures including entories- are correct. 2. Notes to financial statements a. Must be quantifiable. b. Must qualify as an element. ‘ c. Amplify items presented in the financial statements. d. All of the choices are correct 3.Which is not a method of disclosing pertinent information? Supporting schedule Parenthetical explanation Cross reference and contra item All of these are methods of disclosing pertinent information peop 4. The disclosure of accounting policies is important to financial statement users in determining mm a. Net income for b. Whether aceProblem 3-4 Multiple ch 1 i . What is the pur) . Which of the followi we . The notes to finay ice (AICPA Adapted) se of, information presented in the notes po: 9 to financial statements? josures required by generally accepteq a. To provide disclosures a 2 “ b. Pee ie presentation 10 the financia) "statements i ¢. To provide recognit total of the financia d. To present mana comments tion of amounts not included in the | statements : gement response to auditor ing information should be disclosed in the summary of significant accounting policies? a. Refinancing of debt subsequent to the reporting period b. Guarantee of indebtedness of others k c. Criteria for determining which investments are treated as cash equivalents , d. Adequacy of pension plan assets relative to the defined benefit obligation Which of the following is not a required disclosure of accounting policies? a. The measurement t b. Key management summary of signifi a d. The nature of o disclosed . Deserilpted) Morey Company in the the individual entities caicpA Adal Problem 3-5 ed 100% of Dean Company acauir' i i current year, following: BOE oe DEE enti) statements the ig included in igen Morey 750,000 500,000 Key officers’ salaries 200,000 100,000 Officers’ expenses 1,250,000 500,000 Loans to officers 1,500,000 Intercompany sales d be reported as related party Dean Company's consolidated rrent year? What total amount shoul disclosures in the notes to financial statements for the cw 1,500,000 1,550,000 1,750,000 3,000,000 ear Problem 3-6 (IFRS) Gibson Company reported that rem1 payments made to the entity’s chief e the current year were: Annual salary Share options and other shay Contributions to retirement be Reimbursement of. travel expe What total amount should hey management per, 3,500,000 4,700,000 3,000, Bese Sano t 'oice (IFRS) r Problem 3-8 Multiple ch management personne) 1. Which is not included in key compensation? ‘a. Short-term benefit b, Share-baged payment i i ene) g. Termination oncr out-of-pocket expenses 2. Which of the following is not a mandated disclosure about related party transactions? etween parent and subsidiaries elationship 1 a. Relationship hyo" ;ssociates that an entity has dealt b. Names of all # with during the year. a c. Name of te entity's parent and, if different, the ultimate controlling party. ; d. If neither the entity's parent nor the ultimate controlling entity produces financial statements available for public use, then the name of the next most senior parent that does so. 3. Which of the following is not a required minimum disclosure about related party transaction? a. The amount of related party transaction b. The amount of the outstanding balance c. The amount of similar transaction with unrelated parties to establish | transaction has bee d. Doubtful debt rela6.An entity that entered into a related party transaction would be required to disclose all of the following information, except Nature of the relationship between the par‘ies. Nature of any future transactions planned between the parties and the terms involved. Peso amount of the transaction. Amount due from or to related parties at the end of reporting period. 7. Which is not a required related party disclosure? a. The son of the chief executive officer of the entity b. The parent of the entity c, An entity that has a common director with the entity d. Joint venture in which the entity is a venturer 8. All of the following are related parties, except a. Joint venture in which the entity is a venturer b. A postemployment benefit plan for the employees c. An executive director of the entity d. The partner of a key manager is a major supplier of the entity 9. Which of the following is not a related party of an entity? a. A shareholder of the entity owning twenty percent b. An entity providing banking facilities to the entity c. An associate of the entity ; d. Key management personnel of the entity 10. Which of the following should be included in key management personnel compensation? a. Social security ont ae ; b. Postemployment benefits c. Social eavity contributions and postemplo a. Bieecity contributions, postemplo and dividends to shareholdersProblem 3-12 (FRS) jsion of P2,000,000 in the draf, i rovis a eae the ea December 31, 2029 in relation to an unresolved cour" 2021, when the financial statements for the ea eer » inber 31, 2020 had not yet been authorized oe a Bis a was settled and the coun 4 ea e final total damages to be paid by the entity at P3,000,000. What amount should be adjusted on December 31, 2020 in relation to this event? a. 3,000,000 b. 2,000,000 c. 1,000,000 d. 0 Problem 3-13 (IFRS) Pink Company is completing the preparation of the draft financial statements for the year ended December 31, 2020. The financial statements are authorized for issue on March 31, 2021. On January 31, 2021, a dividend of P2,000,000 was declared and a contractual profit share payment of P200,000 was made, both based on the profit for the year ended Decem On February 15, 2021, a having owed the entity allowance had been made a financial statements. " On March 1, 2021, a mam fire resulting in a financial What total amount should the year ended Decemb, after the end of reporti a. . 3,600,000 . 2,500,000 . 1,100,000 aa aProblem 3-15 (FRS) £ Norway Company is December . ‘od of No a onder per ahr a are authored for issue on March 15, 2021. sisi a * December 31, 2020, Norway gempeny AS TAG erteattyiso soneitomer that is due 60 days after the of P400, end of reporting period. i On January db, 2021, a receivers appointed for the ont customer, The receiver informed Norway that the Pi00.000 would be paid in full by December 31, 2021. ity i ts held for * Norway Ci any had equity investmen pea ones bar 31, 2020, these investments were recorded at the fair value of P5,000,000. During the period up to February 15, 2021, there was a steady decline in the fair value of all the shares in the portfolio, and on February 15, 2021, the fair value had fallen-to P2,000,000. * Norway Company had reported a contingent liability on December 31, 2020 related to a court case in which Norway Company was the defendant. The case was not heard until the first week of February 2021. On February 15, 2021, the Judge handed down a decision Kae Nemuey, Company. Th determined that nN Hane omeaey was liable ! mages totaling On December 31, 2020, Nor from a large customer in ¢ On January 31, 2021, writing by the liquidator customer was insoly, receivable will be paid What total amount should ] on December 31, 20209 4 a. 6,150,000 b. 9,150,000 c. 9,550,000 d. 6,500,000problem 3-16 Multiple choice (FRS) 4, At the end of the cur carried a receival . Make a provision for thi . Disclose the fact th: ‘at the customer has declared bankruptcy. e event after reporting period in the financial statements, a os Ignore the event and wait for the outcome of the bankruptcy. Reverse the sale pertaining to the receivable in the comparative statement for the prior period. . An entity decided to build and operate an amusement park next year. The entity applied for a letter of guarantee which was issued before the issuance of the financial statements of the current year. What is the adjustment required at the current year-end? a. b. ce d . Book a long-term payable for the amount of guarantee. . Disclose the guarantee as a contingent liability. Increase the contingency reserve. - Do nothing . An entity built a new factory building during the current year. Subsequent to the current year-end and before issuance of financial statements, the building was destroyed by fire and the claim against the insurance ~ entity proved futile because the cause of the fire was negligence on the part of the caretaker of the building. What should be reported at the current year-end? . Write off the carrying amount of the building. . Maes 5 provision for one-half of the carrying amount - Make a provision - Disclose the nona Sean: for three-fourths of the ca amount of the bul ting event in the n financial statements.— EE 7 th foreign currency rting period to the end of report transactions, Subset fy thorization of the igeuanes Ke i os ncial statements, there ee euncraial fluctuations in foreign currency rate. Wh: wuld be reported at the current year-end? i wi 4.An entity deals extensively foreign exchange year-end balances to yl reflect the abnormal adverse fluctuations. b. Adjust the foreign exchange year-end balances to reflect all abnormal fluctuations and not just adverse movements. c. Disclose the post-reporting period event. d. Ignore the post-reporting period event. ! a. Adjust the 5. Waecuibsatement is true in relation to events after reporting period? a Mates he financial statements should give details of material adjusting events i i i ere ig events included in those financial economic decisions A decline in the x normally be clas The settlement normally be clas