Page |1

Chapter 8
Notes – Part 2

NAME: Date:
Professor: Section: Score:

QUIZ 1: RELATED PARTIES

1. Which of the following statements is incorrect?
a. Related party transactions and outstanding balances with other entities in a group are
disclosed in an entity’s financial statements.
b. Intragroup related party transactions and outstanding balances are not eliminated in the
preparation of consolidated financial statements of the group.
c. Related party relationships are a normal feature of commerce and business.
d. A related party relationship could have an effect on the profit or loss and financial position of
an entity.
e. Knowledge of related party transactions, outstanding balances and relationships may affect
assessments of an entity’s operations by users of financial statements, including assessments of
the risks and opportunities facing the entity.

2. An entity’s ability to affect the financial and operating policies of an investee is through the
presence of
I. Control
II. Joint control
III. Significant influence
a. I only b. I or III c. Any of I, II, or III d. I, II and III

3. Which of the following statements is correct?

I. The profit or loss and financial position of an entity may be affected by a related party
relationship even if related party transactions do not occur.
II. The mere existence of the relationship may be sufficient to affect the transactions of the entity
with other parties.
a. True, true b. True, false c. False, false d. False, true

4. All of the parties enumerated are related to an entity , except

a. the entity is a subsidiary, an associate, or a venture in a joint venture.
b. the party is a member of the key management personnel of the entity or its parent.
c. the party is a close member of the family of an individual having control, significant influence,
or joint control over the entity or a member of the key management personnel of the entity or
its parent.
d. the party is a post-employment benefit plan for the benefit of employees of the entity, or of
any entity that is a related party of the entity.
e. two entities simply because they have a director or other member of key management
personnel in common

5. The following relates to the transactions of MISCELLANY MIXTURE Company during 20x1:

This study source was downloaded by 100000830173763 from CourseHero.com on 03-31-2022 01:13:20 GMT -05:00

https://www.coursehero.com/file/60616378/Gonzales-QUIZ-CHAPTER-8-NOTES-PART-2-copypdf/
 Page |2

Directors' and officers' remuneration 4,000,000

Post-employment benefits of officers 400,000
Fringe benefits in the form of housing assistance to directors
and officers 10,000,000
Share options granted to officers 600,000
Officers' expenses on travels, representation and
entertainment subject to liquidation and reimbursement 200,000
Loans to directors and officers 6,000,000
Sales to related entities 20,000,000

Requirements: Determine the amount of related party disclosures on MISCELLANY’s (a) separate
financial statements and (b) the group’s consolidated financial statements.

“So do not fear, for I am with you; do not be dismayed, for I am your God. I will
strengthen you and help you; I will uphold you with my righteous right hand.”
(Isaiah 41:10)

- END -

This study source was downloaded by 100000830173763 from CourseHero.com on 03-31-2022 01:13:20 GMT -05:00

https://www.coursehero.com/file/60616378/Gonzales-QUIZ-CHAPTER-8-NOTES-PART-2-copypdf/
 Quiz 1: No. 5
(a) Separate financial statements
Key management personnel compensation:
Directors' and officers' remuneration 4,000,000
Post-employment benefits of officers 400,000
Fringe benefits in the form of housing assistance to directors
and officers 10,000,000
Share options granted to officers 600,000
15,000,000
Related party transactions and outstanding balances:
Loans to directors and officers 6,000,000
Sales to related entities 20,000,000
26,000,000

TOTAL 41,000,000

(b) Consolidated financial statements
Key management personnel compensation:
Directors' and officers' remuneration 4,000,000
Post-employment benefits of officers 400,000
Fringe benefits in the form of housing assistance to directors
and officers 10,000,000
Share options granted to officers 600,000
15,000,000
Related party transactions and outstanding balances:
Loans to directors and officers 6,000,000
6,000,000

TOTAL 21,000,000

This study source was downloaded by 100000830173763 from CourseHero.com on 03-31-2022 01:13:20 GMT -05:00

https://www.coursehero.com/file/60616378/Gonzales-QUIZ-CHAPTER-8-NOTES-PART-2-copypdf/
 Page |4

NAME: Date:
Professor: Section: Score:

QUIZ 2: OPERATING SEGMENTS

1. MISCREANT UNBELIEVING Co. is preparing its year-end financial statements and has identified
the following operating segments:
Segments Revenues Profit (loss) Assets
A 2,000,000 400,000 28,000,000
B 2,400,000 280,000 36,000,000
C 540,000 (140,000) 24,000,000
D 480,000 (1,400,000) 2,000,000
E 580,000 100,000 2,800,000
Totals 6,000,000 (760,000) 92,800,000

Requirement: Identify the reportable segments.

2. LIMPID CLEAR Company engages in five diversified operations namely, operations A, B, C, D,

and E. Information on these segments are shown below:

Segments Revenues Profit (loss) Assets

A 1,600 400 20,000
B 1,600 200 4,000
C 100 20 2,000
D 300 40 4,000
E 400 140 14,000
Totals 4,000 800 44,000

Additional information:
a. For internal reporting purposes, segments A and B are considered as one operating segment.
b. Segment E is considered as an operating segment for internal decision making purposes.
c. Segments C and D have similar economic characteristics and share a majority of the aggregation
criteria.

Requirement: Identify the reportable segments.

3. TACITURN SILENT Co. is preparing its year-end financial statements and has identified the
following operating segments:
External Inter-segment Total
Segments revenues revenues revenues Profit Assets
A 2,400,000 1,200,000 3,600,000 1,400,000 24,000,000
B 800,000 200,000 1,000,000 800,000 14,000,000
C 500,000 - 500,000 200,000 2,000,000
D 400,000 400,000 160,000 1,600,000
E 300,000 300,000 140,000 1,400,000
F 200,000 200,000 100,000 1,000,000

This study source was downloaded by 100000830173763 from CourseHero.com on 03-31-2022 01:13:20 GMT -05:00

https://www.coursehero.com/file/60616378/Gonzales-QUIZ-CHAPTER-8-NOTES-PART-2-copypdf/
 Quiz 2: No. 1
Segments Revenues 10% Test Proft Loss 10% Test Assets 10% Test
A 2,000,000 ✓ 400,000 ✓ 28,000,000 ✓
B 2,400,000 ✓ 280,000 ✓ 36,000,000 ✓
C 540,000 ✗ -140,000 ✗ 24,000,000 ✓
D 480,000 ✗ -1,400,000 ✓ 2,000,000 ✗
E 580,000 ✗ 100,000 ✗ 2,800,000 ✗

TOTALS 6,000,000 780,000 -1,540,000 92,800,000
10% ₱600,000 ₱78,000 -₱154,000 ₱9,280,000

MISCREANT UNBELIEVING Co. shall disclose four reportable segments in its notes to financial
statements, namely, segments A, B, C, and D.


Quiz 2: No. 2
Segments Revenues Test P/L Test Assets Test
A 1,600 N/A 400 N/A 20,000 N/A
B 1,600 N/A 200 N/A 4,000 N/A
C 100 3% 20 3% 2,000 5%
D 300 8% 40 5% 4,000 9%
E 400 N/A 140 N/A 14,000 N/A

TOTALS 4,000 800 44,000
10% 400 80 4400

(C/D) 400 60 6,000

LIMPID CLEAR Company shall disclose three reportable segments in its notes to financial
statements, namely, “A/B”, “E”, and “C/D”.

This study source was downloaded by 100000830173763 from CourseHero.com on 03-31-2022 01:13:20 GMT -05:00

https://www.coursehero.com/file/60616378/Gonzales-QUIZ-CHAPTER-8-NOTES-PART-2-copypdf/
 Page |5

Totals 4,600,000 1,400,000 6,000,000 2,800,000 44,000,000

Management believes that between segments C, D, E and F, segment C is most relevant to external
users of financial statements.
Requirement: Identify the reportable segments.

4. FIDELITY LOYALTY Co. has the following information on its operating segments.
External Inter-segment Total
Segments revenues revenues revenues Profit Assets
A 2,400,000 1,200,000 3,600,000 1,400,000 24,000,000
B 800,000 200,000 1,000,000 800,000 14,000,000
C 500,000 - 500,000 200,000 2,000,000
D 400,000 - 400,000 160,000 1,600,000
E 300,000 - 300,000 140,000 1,400,000
F 200,000 - 200,000 100,000 1,000,000
Totals 4,600,000 1,400,000 6,000,000 2,800,000 44,000,000

Question: FIDELITY Co. shall provide disclosure for major customers if revenues from transactions
with a single external customer amount to how much?

“Let us therefore come boldly to the throne of grace, that we may obtain mercy and
find grace in time of need.”
(Hebrews 4:16)

- END –

This study source was downloaded by 100000830173763 from CourseHero.com on 03-31-2022 01:13:20 GMT -05:00

https://www.coursehero.com/file/60616378/Gonzales-QUIZ-CHAPTER-8-NOTES-PART-2-copypdf/

Quiz 2: No. 3
Inter-
External Total
Segments Segment Profits Assets
Revenues Revenues
Revenues
A 2,400,000 1,200,000 3,600,000 ✓ 1,400,000 ✓ 24,000,000 ✓
B 800,000 200,000 1,000,000 ✓ 800,000 ✓ 14,000,000 ✓
C 500,000 500,000 ✗ 200,000 ✗ 2,000,000 ✗
D 400,000 400,000 ✗ 160,000 ✗ 1,600,000 ✗
E 300,000 300,000 ✗ 140,000 ✗ 1,400,000 ✗
F 200,000 200,000 ✗ 100,000 ✗ 1,000,000 ✗


TOTALS 4,600,000 1,400,000 6,000,000 2,800,000 44,000,000
10% 460,000 ₱600,000 ₱280,000 ₱4,400,00


However, the sum of the external revenues of segments A and B does not meet the 75%
limit as shown below:
Segments External Revenues
A 2,400,000
B 800,000

Total external revenues of A and B ₱3,200,000

Entity's total external revenues
4,600,000
Multiply by: 75%

Limit in external revenues of reportable segments ₱3,450,000

Therefore, if management believes that of the other segments (i.e., C, D, E, and F),
information on segment C is most relevant to users, segment C shall be disclosed as a
reportable segment even if it does not meet any of the quantitative thresholds in order
for the "75% limit" to be met.

TACITURN SILENT Co. shall disclose three reportable segments in its notes to financial
statements, namely, segments A, B, and C. Segments D, E, and F are combined and
disclosed as “all other segments”.


Quiz 2: No. 4
Answer: FIDELITY Co. shall provide disclosure for major customers if revenues from
transactions with a single external customer amount to ₱460,000 (4,600,000 x 10%).

This study source was downloaded by 100000830173763 from CourseHero.com on 03-31-2022 01:13:20 GMT -05:00

https://www.coursehero.com/file/60616378/Gonzales-QUIZ-CHAPTER-8-NOTES-PART-2-copypdf/
Powered by TCPDF (www.tcpdf.org)