Week 1

DISCLAIMER: The information content provided in this course material is designed to provide helpful
information on the subjects discussed. Some information is compiled from different materials and
summarized from different books. Some information is based on contributors' perspective and
understanding. References are provided for informational purposes only and do not constitute
endorsement of websites or other sources. Readers should be aware that the websites/electronic
references listed in this course material may change. Hence, the contributors do not claim any
information presented in the materials and do not reflect their own work.
Subject Code: BAIACC2X

Subject Title: Intermediate Accounting 2
Subject Description: This course will introduce the concepts of liabilities, shareholder’s equity,
and some special topics. It will specifically discuss the application of
accounting standards on financial and non-financial liabilities,
shareholder’s equity and special topics on leases, income taxes and
employee benefits.
No. of Units: 6
Class Schedule: MTH / 9:00-1:00pm
Course Learning Outcomes:

At the end of this course, the student will be able to:
1. Recognize, measure, and present financial assets and financial liabilities in accordance with
applicable PFRS
2. Describe the principles and standards underlying the recognition, measurement, presentation,
and disclosure requirements of the assets in statement of financial position.
3. Employ technology as a business tool in capturing financial and non – financial information,
preparing reports and making decisions.
4. Apply acquired knowledge and skills to pass professional licensure / certification examinations.
About the Instructor:

PROF. JOMAR VILLENA, CPA, MBA
• Program Chair, Accountancy (NU Baliwag)
• Coordinator, Center for Innovation and Entrepreneurship (NU Baliwag)
• Public Practitioner, JMV Accounting and Auditing Services
• Doctor in Business Administration – New Era Universiry (On-going)
• Master in Business Administration – New Era University
• Graduated from Baliwag Polytechnic College (Cum Laude) – Batch 2016
• Member, Student Participation Committee, PICPA Bulacan
• Tax Accountant, English as a Second Language (ESL) Phil. Corp.
• Accounting Supervisor, 4AQ Grill Inc.
SM Baliwag Complex, Dona Remedios Trinidad Highway, Brgy. Pagala, Baliwag, Bulacan
(+63) 927-533-0342 – (+63) 923-949-5265 admissions-nubaliwag@nu.edu.ph
MODULE 1
LIABILITIES
I. Pre-Test
Problem 1-1
On December 21,2020, Glare Company provided the following information:
Accounts payable. including deposit and advances
from customer of P250,000 1,250,000
Notes payable, including note payable to bank due on
December 31, 2022 of P500,000 1,500,000
Share dividend payable 400,000
Credit balances in customer’s account 200,000
Serial bonds payable in semiannual installment of P500,000 5,000,000
Accrued interest on bonds payable 150,000
Contested BIR tax assessment – possible obligation 300,000
Unearned rent income 100,000
Required:
Compute the total current liabilities on December 31,2020.
Problem 1-2
Easy Company provided the following information on December 31,2020:
Notes payable
Trade 3,000,000
Bank loans 2,000,000
Advances from officers 500,000
Accounts payable – trade 4,000,000
Bank overdraft 300,000
Dividends payable 1,000,000
Withholding tax payable 100,000
Mortgage payable 3,800,000
Income tax payable 800,000
Estimated warranty liability 600,000
Estimated damages payable y reason of breach of contract 700,000
Accrued liabilities 900,000
Estimated premium liability 200,000
Claim for increase of wages by employees covered in a pending lawsuit 3,500,000
Contract entered into for the construction of building 5,000,000
Required:
Compute the total current liabilities on December 31, 2020.
II. Learning Outcomes
ü To understand the concept of liabilities.
ü To describe the nature and type of current and noncurrent liabilities.
ü To explain the issue of long-term debt falling due within one year.
ü To explain the issue of breach of covenants attached to a long-term debt.
ü To describe formulas in computing bonus to officers and employees
III. Content:
LIABILITIES
Definition of Liabilities
Liabilities are present obligations of an entity to transfer an economic resource as a result of past events.
Accordingly, the essential characteristics of an accounting liability are:
a. The entity has a present obligation.
An obligation is a duty or responsibility that an entity has no practical ability to avoid.
The entity liable must be identified but it is not necessary that the payee to whom the obligation
is owed be identified.
b. The obligation is to transfer an economic resource.
This is the very heart of the definition of an accounting liability.
The economic resource is the asset that represents a right with a potential to produce economic
benefits.
Specifically, the obligation must be to pay cash, transfer noncash asset or provide service at some
future time
c. The liability arises from a past event.
This means that the liability is not recognized until it is incurred.
Present obligation
µ The present obligation may be a legal obligation or a constructive obligation.
Transfer of an economic resource
Without payment of money, without transfer of noncash asset,

without performance of service, there is no accounting liability.
A crystallization of the definitive concept of an accounting liability is

when an entity declares cash dividend. In such a case, there is an
obligation to pay cash, hence, accounting liability exists.
Cash Dividend Share Dividend
Accounting liability No accounting liability
The obligation is to issue the entity’s own shares.

The issuance of the entity’s own shares is not a
transfer of noncash asset because the share capital is
an equity item.
Thus, share dividend payable is classified as a part

of equity rather than an accounting liability.
Past event
& Liability must arise from a past transaction or event.
& The past event that leads to a legal or constructive obligation is known as an obligating event.
& The obligating event creates a present obligation because the entity has no realistic alternative
but to settle the obligation created by the event.
Transactions Obligating Event

Acquisition of goods on account (gives rise to Acquisition of goods.
accounts payable)
Receipt of a bank loan (gives rise to Loan payable) Obligation to repay the loan.
Examples of liabilities
The more common type of liabilities includes the following:
a. Accounts payable to suppliers for the purchase of goods
b. Amounts withheld from employees for taxes and for contributions to the Social Security System,
Philhealth, Pag-ibig, BIR.
c. Accruals for salaries, interest, rent, taxes, product warranties and profit-sharing bonus
d. Cash dividends declared but not paid
e. Deposits and advances from customers
f. Debt obligations for borrowed funds – notes, mortgages, and bonds payable
g. Income tax payable
h. Unearned revenue
Measurement of current liabilities

µ Conceptually, all liabilities are initially measured at present value and subsequently measured at
amortized cost.
µ However, in practice, current liabilities or short-term obligations are not discounted anymore but
measured, recorded, and reported at face amount.
µ The reason is that the discount or the difference between the face amount and the present value
is usually not material and therefore ignored.
Measurement of noncurrent liabilities

µ If the long-term payable is non-interest-bearing note payable, are initially measured at present
value, and subsequently measured at amortized cost.
µ If the long-term note payable is interest-bearing, it is initially and subsequently measured at face
amount. In this case, the face amount is equal to the present value of the note payable.
Nature of Liability Initial Measurement Subsequent Measurement

Current Liability Face Amount -
Non-current liability Face Amount Amortized Cost
Interest Bearing Note
Non-current liability Present Value Amortized Cost
Non-interest-bearing Note
Face Amount – 500,000

Less: Present Value – 450,000
Unearned Interest – 50,000
Current liabilities vs. non-current liabilities
Current Liabilities Non-current liabilities
PAS 1, paragraph 69, provides that the entity shall The term noncurrent liability is a residual
classify a liability as current when: definition.
a. The entity expects to settle the liability
within the entity’s operating cycle.
b. The entity holds the liability primarily to
the purpose of trading.
c. The liability is due to be settled within
twelve months after the reporting period.
d. The entity does not have an unconditional
right to defer settlement of the liability for
at least twelve months after the reporting
period.
1. Financial liability measured at FVPL (i.e., 1. Noncurrent portion of long-term debt.

designated or held for trading) 2. Finance least liability.
2. Current portion of long-term notes, bonds, 3. Deferred tax liability.
loans, and lease liabilities 4. Long-term obligation to officers.
3. Trade accounts and notes payables 5. Long-term deferred revenue.
4. Other non-trade payables due within 12
months after end of reporting period
5. Unearned income expected to be earned
within 12 months after the end of the
reporting period.
6. Bank overdrafts
WHAT IS OPERATING CYLCE?

µ The period required to convert cash into raw materials, raw
materials into inventory finished goods, finished good
inventory into sales and accounts receivable, and accounts
receivable into cash.
µ Trade payables and accruals for employee and other
operating costs are part of the working capital used in the
entity’s normal operating cycle.
µ Such operating items are classified as current liabilities
even if settled more than twelve months after the reporting
period.
µ When the entity’s normal operating cycle is not clearly
identifiable, its duration is assumed to be twelve months.
Illustration 1: Current liabilities
ABC Co. has the following liabilities as of December 31, 20x1.
a. Trade accounts payable, net of debit balance in supplier's
account of P5,000, net of unreleased checks of P4,000, and net of
postdated checks of P2,000. P300,000
b. Credit balance in customers' accounts 2,000
c. Financial liability designated at FVPL 50,000
d. Bonds payable (maturing in 10 equal annual
installments of P100,000) 1,000,000
e. 12%, 5-year note payable issued on October 1, 20x1 100,000
f. Deferred tax liability 5,000
g. Unearned rent 4,000
h. Contingent liability 10,000
i. Reserve for contingencies 25,000
Requirement: How much is the total current liabilities?
Solution:
a. Trade accounts payable gross of debit balance, unreleased
check, and postdated check (300K + 5K+ 4K + 2K). P311,000
b. Advances from customers (Cr. bal. in customers' accounts) 2,000
c. Financial liability designated at FVPL 50,000
d. Current portion of bonds payable 100,000
e. Interest payable on the note in 'e' (P100,000 x 12% x 3/12) 3,000
g. Unearned rent 4,000
Total current liabilities P470,000
Notes:
ü Deferred tax liabilities are always presented as noncurrent when an entity presents a classified
statement of financial position.
ü Contingent liability is not recognized but rather disclosed only in the notes.
ü Reserve for contingencies is an appropriation of retained earnings and, thus, presented in equity.
Illustration 2: Current liabilities

ABC Co. has the following liabilities as of December 31, 20x1.
a. Trade accounts payable, including cost of goods received on
consignment of P10,000 P300,000
b. Held for trading financial liabilities 50,000
c. Deferred revenue 20,000
d. Bank overdraft 10,000
e. Income tax payable 50,000
f. Accrued expenses 5,000
g. Share dividend payable 12,000
h. Advances from affiliates payable in 15 months after year-end 23,000
i. Loan of XYZ, Inc. guaranteed by ABC - it is possible
that ABC will be held liable for the guarantee 45,000
Requirement: How much is the total current liabilities?
Solution:
a. Trade accounts payable, net of cost of goods received
on consignment (300,000 - 10,000) P290,000
b. Held for trading financial liabilities 50,000
c. Bank overdraft 10,000
d. Income tax payable 50,000
e. Accrued expenses 5,000
Total current liabilities P405,000
Notes:
ü Deferred revenue is similar to unearned revenue except that deferred revenue is long-term.
ü Share dividends payable (stock dividends payable) is not a liability but rather an adjunct equity
account (i.e., presented as addition to share capital).
ü The guarantee on the loan is not recognized as liability because it is not probable (i.e, it is possible
only) that ABC will be held liable for the guarantee.
Overview of Refinancing Agreement

January 2, 2016, Inutil Online Selling borrowed to BPI Bank a 5M loan payable after 5 years.
2016 Non-current liability
2020 Current liability
Can Inutil Online Selling have the option to reclassify it as non-current

in the year 2020?
Ø Refinancing refers to the replacement of an existing debt with a new one but with different terms,
e.g., an extended maturity date or a revised payment schedule.
Ø Refinancing normally entails a fee or penalty.
Ø A refinancing where the debtor is under financial distress called "troubled restructuring."
Long-term debt falling due within one year

A liability which is due to be settled within twelve months after the reporting period is classified as
current, even if:
a. The original term was for a period longer than twelve months.
b. An agreement to refinance or to reschedule payment on a long-term basis is completed after the
reporting period and before the financial statements are authorized for issue.
A liability which is due to be settled within twelve months after the reporting period is classified as non-
current, WHEN:
Refinancing on a long-term completed on or before the end Noncurrent.
basis of the reporting period
The entity has the discretion to for at least twelve months after Noncurrent.
refinance or roll over an the reporting period under an
obligation existing loan facility
If the entity has an to defer settlement of the Noncurrent.
unconditional right under the liability for at least twelve
existing loan facility months after the reporting
period
Continuation: Inutil Online Selling – Date of Settlement - 2020

On or before the end of the reporting After the reporting period before
period financial statement is authorized for
issue
Non-Current! " %
$
# Current &
(
'
Illustration: Refinancing
Fact pattern
ABC Co. has a 10%, P1,000,000 loan payable as of December 31, 20x1 that is maturing on July 1, 20x2.
Interest on the loan is due every July 1 and December 31.
Case 1: No discretion
On February 1, 20x2, ABC Co. entered into a refinancing agreement with a bank to refinance the
loan on a long-term basis. Both parties are financially capable of honoring the agreement's
provisions. ABC's financial statements were authorized for issue on March 15, 20x2.
Question: How much is presented as current liability in relation to the loan in ABC's 20x1 year-end
financial statements?
Answer: P1,000,000, the refinancing agreement is not at the discretion of ABC. The currently maturing
obligation is presented as current liability.
Case 2: With discretion
On February 1, 20x2, ABC Co. entered into a refinancing agreement with a bank to refinance
the loan on a long-term basis, both parties are financially capable of honoring the agreement's
provisions. ABC has the discretion to refinance or roll over the loan for at least twelve months
from December 31, 20x1 under an existing loan facility. ABC's financial statements were
authorized for issue on March 15, 20x2.
Answer: None, the refinancing agreement is at the discretion of ABC. The loan payable is presented as
noncurrent.
Case 3: Refinancing completed as of end of reporting period

On December 1, 20x1, ABC Co. entered into a refinancing agreement with a bank to refinance
the loan on a long-term basis. The refinancing and roll over transaction was completed on
December 31, 20x1.
Answer: None, the refinancing is completed as of the end of reporting period. The loan payable is
presented as noncurrent.
Covenants
µ Covenants are often attached to borrowing agreements which represents undertakings by the
borrower.
µ These covenants are restrictions on the borrower as to undertaking further borrowings, paying
dividends, maintaining specified level of working capital and so forth.
Breach of covenants
& Under these covenants, if certain conditions relating to the borrower’s financial situation are
breached, the liability becomes payable on demand.
& PAS 1, paragraph 74, provides that

& If the lender has agreed, after the reporting Current.
period and before the statements are Why? This liability is classified as current
authorized for issue, not to demand because at the end of the reporting period, the
payment as a consequence of the breach. entity does not have an unconditional right to
defer settlement for at least twelve months after
that date.
& The lender has agreed on or before the end Noncurrent.

of the reporting period to provide a grace
period ending at least twelve months after Why? In the context, a grace period is a period
that date. within which the entity can rectify the breach and
during which the lender cannot demand
immediate repayment.
Presentation of current liabilities

Under paragraph 54 of PAS 1, as a minimum, the face of the statement of financial position shall include
the following line items for current liabilities.
a. Trade and other payables
b. Current provisions
c. Short-term borrowing
d. Current portion of long-term debt
e. Current tax liability
The term trade and other payables is a line item for accounts payable, notes payable, accrued interest
on note payable, dividends payable and accrued expenses.
Estimated liabilities
° Estimated liabilities are obligations which exist at the end of reporting period although their
amount is not definite.
° In many cases, the date when the obligation is due is not also definite and in some instances, the
exact payee cannot be identified or determined.
° But despite these circumstances, the existence of the estimated liabilities is valid and
unquestioned.
° Estimated liabilities are either current or noncurrent in nature,
° Examples include estimated liability for premium, award points, warranties, gift certificates and
bonus.
Deferred revenue
° Deferred revenue or unearned revenue is income already received but not yet earned.
° If the unearned revenue is realizable within one year, it is a current liability.
° Typical examples or current unearned/deferred revenue are unearned interest income, unearned
rental income, and unearned subscription revenue.
° If the deferred revenue is realizable in more than one year, it is classified as noncurrent liability.
° Typical examples of noncurrent deferred revenue are unearned revenue from long-term service
contracts and long-term leasehold advances.
Illustration
An entity sells equipment service contacts agreeing to service equipment for 2-year period.
Cash receipts from contracts are credited to unearned service revenue and service contract costs are
charged to service contract expense.
Revenue from service contracts is recognized as earned over the service period of the contract.
The following transactions occur in the first year:
Cash receipts from service contracts sold 1,000,000
Service contact costs paid 500,000
Service contact revenue recognized 800,000
Journal entries for first year

1. To record the cash receipts from service contracts sold:
Cash 1,000,000
Unearned service revenue 1,000,000
2. To record the service contract costs paid:
Service contract expense 500,000
Cash 500,000
3. To record the service contract revenue recognized:
Unearned service revenue 800,000
Service contract revenue 800,000
Gift certificate
Many megamalls, department stores and supermarkets sell gift certificates which are redeemable in
merchandise. The accounting procedure are:
1. When the gift certificates are sold:
Cash xx
Gift certificates payable xx
The latter amount is a current liability.
2. When the gift certificates are redeemed:

Sales xx
3. When the gift certificates expire or when gift certificates are not redeemed:
Forfeited gift certificates xx
The Philippine Department of Trade Industry ruled that gift certificates no longer have an
expiration period.
Bonus computation
& Large entities often compensate key officers and employees by way of bonus for superior income
realized during the year.
& The main purpose of this scheme is to motivate officers and employees by directly relating their
well-being to the success of the entity.
& This compensation plan results in liability that must be measured and reported in the financial
statements. The bonus computation usually has four variations:
1. Bonus is expressed as a certain percent of income before bonus and before tax.
2. Bonus is expressed as a certain percent of income after bonus but before tax.
3. Bonus is expressed as a certain percent of income after bonus and after tax.
4. Bonus is expressed as a certain percent of income after tax but before bonus.
Illustration
Income before bonus and after tax 4,400,000
Bonus 10%
Income tax rate 30%
Case 1 – Before bonus and before tax

Income before bonus and before tax 4,4000,000
Multiply by 10%
Bonus 440,000
Case 2 – After bonus but before tax
B = .10 (4,400,000 – B)
B = 440,000 - .10B
B + .10B = 440,000
1.1B = 440,000
B = 440,000/1.10
B = 400,000
Proof
Less: Bonus 400,000
Income after bonus but before tax 4,000,000
Multiply by 10%
Bonus 400,000
Case 3 – after bonus and after tax

B = .10 (4,400,000 – B - T)
T = .30 (4,400,000 – B)
B = .10 [4,400,000 – B -(.30 (4,400,000 – B)]

B = .10 (4,400,000 – B -1,320,000 +.30B
B = 440,000 - .10B – 132,000 + .03B
B + .10B - .03B = 449,000 – 132,000
1.07B = 308,000
B 380,000 / 1.07
B = 287,850
T = .30 (4,400,000 – 287,850)

T = 1,233,645
Proof
Bonus (287,850)
Tax (1,233,645)
Income after bonus and after tax 2,878, 645
Multiply by 10%
Bonus 287,850
Case 4 – After tax but before bonus
B = .10 (4,400,000 – T)
T = .30 (4,400,000 – B)
B = .10 (4,400,000 - .30 (4,400,000 – B)
B = .10 (4,400,000 – 1,320,000 + .30B)
B = 440,000 – 132,00 + .03B
B - .03B = 440,000 – 132,000
.97B = 308,000
B = 308,000 / .97
B = 317,526
Proof
Tax (4,400,000 – 317,526 x 30%) 1,224,742
Income after tax but before bonus 3,175,258
Multiply by 10%
Bonus 317,526
Refundable deposits
& Refundable deposits consist of cash or property received from customers, but which are
refundable after compliance with certain condition.
& The best example of a refundable deposit is the customer deposit required for returnable
containers like bottles, drums, tanks, and barrels.
Illustration
A deposit of P10,000 is required from the customer for returnable containers. the containers cost P8,0000.
Cash 10,000
Container’s deposit 10,000
° The containers’ deposit account is usually classified as current liability.

° If the customer returns the containers, the deposit is simply refunded.
° However, if the customer fails to return the containers, the deposit is considered the sale price of
the containers.
° The excess of the deposit over the cost of the containers is considered as gain.
IV. Activity – Supplementary
Problem 1-1 (IAA)

On December 21,2020, Glare Company provided the following information:
Accounts payable. including deposit and advances
from customer of P250,000 1,250,000
Notes payable, including note payable to bank due on
December 31, 2022 of P500,000 1,500,000
Share dividend payable 400,000
Credit balances in customer’s account 200,000
Serial bonds payable in semiannual installment of P500,000 5,000,000
Accrued interest on bonds payable 150,000
Contested BIR tax assessment – possible obligation 300,000
Unearned rent income 100,000
Required:
Compute the total current liabilities on December 31,2020.
Problem 1-2 (IAA)

Easy Company provided the following information on December 31,2020:
Notes payable
Trade 3,000,000
Bank loans 2,000,000
Advances from officers 500,000
Accounts payable – trade 4,000,000
Bank overdraft 300,000
Dividends payable 1,000,000
Withholding tax payable 100,000
Estimated warranty liability 600,000
Estimated damages payable y reason of breach of contract 700,000
Estimated premium liability 200,000
Claim for increase of wages by employees covered in a pending lawsuit 3,500,000
Contract entered into for the construction of building 5,000,000
Required:
Problem 1-3 (IAA)
Manchester Company provided the following information on December 31, 2020:
Income taxes withheld from employees 900,000
Cash balance at First State Bank 2,500,000
Cash overdraft at Harbor Bank 1,300,000
Accounts receivable with credit balance 750,000
Estimated expenses of meeting warranties on merchandise previously sold 500,000
Estimated damages as a result of unsatisfactory performance on a contract 1,500,000
Accounts payable 3,000,000
Deferred serial bonds, issued at par and bearing interest at 12%, payable in
semiannual installment of P500,000 due April 1 and October 1 of
each year, the last bond to be paid on October 1, 2026. Interest is also
paid semiannually. 5,000,000
Stock dividend payable 2,000,000
Required:
Problem 1-4 (IAA)

Multiple Company provided the following information on December 31, 2020:
Accounts payable after deducting debit balances in supplier’s accounts
of P100,000 500,000
Note payable – due March 31, 2021 1,000,000
Note payable – due May 1, 2021 800,000
Bonds payable – due December 31, 2022 2,000,000
On March 1, 2021 before the 2020 financial statements were issued, the note payable of P1,000,000 was
replaced by an 18 month note for the same amount.
The entity is considering similar action on the P800,000 note due on May 1, 2021. The financial
statements were issued on March 1, 2021
Required:
1. Compute total current liabilities.
2. Compute total noncurrent liabilities.
Problem 1-5 (IAA)

On December 31, 2020, Cordillera Company reported the following liabilities:
Note payable – 9% 3,000,000
Note payable – 8% 6,000,000
Note payable – 10% 4,000,000
Note payable – 11% 5,000,000
The 9% note payable is noncancelable and matures on July 31, 2021. Sufficient cash is expected to be
available to retire the note at maturity.
However, the call option is not expected to be exercised given the prevailing market condition.
The 10% note payable is due on March 31, 2022. A debt covenant requires Cordillera Company to
maintain current assts at least equal to 150% of current liabilities.
On December 31,2020, Cordillera Company is in violation of this covenant.
However, Cordillera Company obtained a waiver from the creditor until June 2021 having convinced the
creditor that Cordillera’s normal 2 to 1 ratio of current assts to current liabilities will be reestablished
during the first half of 2021.
The 11% note payable matures on June 0, 2021. On January 31, 2021, before the issuance of the 2020
financial statements, the note payable was refinanced on a long-term basis.
Required:
Explain the appropriate classification of the notes payable as current or noncurrent in the statement of
financial position on December 31, 2020.
Problem 1-6 (IAA)

Intercon Company is planning to refinance certain short-term obligations on a long-term basis. the 2020
financial statements are issued on March 15, 2021.
On December 31, 2020. before reclassification of short-term debt, the liabilities are:
Note payable – bank 12,000,000
Accrued expenses 4,000,000
Note payable – due in 2022 3,000,000
The entity intends to refinance P9,000,000 of the P12,000,000 bank note payable on a long-term basis.
Although the entire P12,000,000 is due on June 30, 2021, the bank has informally agreed to extend the
maturity date for P6,000,000 on June 30, 2022, if necessary.
On January 31, 2021, the entity issued share capital for P4,000,000, net of issue costs and underwriting
fees of P500,000.
On February 15, 2021, the entity entered into a financing agreement with a financially capable
commercial bank, permitting the entity to borrow up to P3,000,000.
Borrowings available at the entity’s option on April 1, 2021, will mature five years after the loan date.
The entity used the entire proceeds of the issue of share capital to retire part of the current note payable
and now intended to draw down the entire available commitment of the five-year debt on April 1, 2021.
Required:
1. Present the liabilities on December 31, 2020.
2. Describe any financial statement disclosures.
Problem 1-7 (IAA)
Cavalier Company provided the following information on December 31, 2020:
Notes payable – bank 8,000,000
Interest payable 150,000
Mortgage note payable – 10% 2,000,000
Bonds payable 4,000,000
• Bank notes payable include two separate notes payable to First Bank.
A P3,000,000, 10% note issued March 1, 2019, payable om demand. Interest is payable every six
months.
A one-year, P5,000,000, 11% note issued January 2, 2020. On December 31, 2020, the entity
negotiated a written agreement with First Bank to replace the note with 2-year, P5,000,000, 10%
note to be issued January 2, 2021.
• The 10% mortgage note was issued October 1, 2019, with a term of 10 years.
Terms of the note give the holder the right to demand immediate payment if the entity fails to
make a monthly interest payment within 10 days of the date the payment is due
On December 31, 2020, the entity is three months behind in paying the required interest payment,
• The bonds payable is 10-year, 8% bonds, issued June 30, 2011. Interest is payable semiannually
on June 30 and December 31.
Required:
V. Activity/Assessment – Visit the MS Teams
Problem 1-8 (IAA)
Burma Company disclosed the following information about liabilities at year-end:
Accounts payable, after deducting debit balances in supplier’s
accounts amounting to P100,000 4,000,000
Accrued expenses 1,500,000
Credit balances of customer’s accounts 500,000
Share dividend payable 1,000,000
Claims for increase in wages and allowance by employees of
the entity, covered in pending lawsuit 400,000
Estimated expenses in redeeming prize coupons presented by customers 600,000
What total amount should be presented as current liabilities at year-end?
a. 6,700,000 c. 7,100,000
b. 6,600,000 d. 7,700,000
Problem 1-9 (IAA)
Gar Company disclosed the following liability account balances on December 31,2020:
Bonds payable 3.400.000
Premium on bond payable 200,000
Deferred tax liability 400,000
Dividends payable 500,000
Note payable, due January 31, 2021 600,000
On December 31, 2020, what total amount should be reported as current liabilities?
a. 7,100,000 c. 3,900,000
b. 4,300,000 d. 4,100,000
Problem 1-10 (AICPA Adapted)

Able Company had the following amounts of long-term debt outstanding on December 31, 2020:
14% note payable, due 2021 30,000
11% note payable, due 2023 1,070,000
8% note payable, due in 11 equal annual principal payments,
plus interest beginning December 31, 2021 1,100,000
7% guaranteed debentures, due 2022 1,000,000
Total 3,200,000
The annual sinking fund requirement on the guaranteed debentures is P40,000 per year.
What total amount should be reported as current liabilities on December 31, 2020?
a. 40,000 c. 100,000
b. 70,000 d. 130,000

Achilles Company reported the following liability balances on December 31, 2020:
12% note payable issued on March 1, 2019, maturing on March 1, 2021 5,000,000
10% note payable issued on October 1, 2019, maturing October 1, 2021 3,000,000
The 2020 financial statements were issued on March 31, 2021.
On January 31, 2021, the entire P5,000,000 balance of the 12% note payable was refinanced through
issuance of a long-term obligation payable lump sum.
Under the loan agreement for the 10% note payable, the entity has the discretion to refinance the
obligation for at least twelve months after December 31, 2020.
What amount of the note’s payable should be classified as current on December 31, 2020?
a. 8,000,000 c. 3,000,000
b. 5,000,000 d. 0

Eliot Company reported the following liabilities on December 31, 2020:
Accounts payable and accrued interest 1,000,000
12% note payable issued November 1, 2019 maturing July 1, 2021 2,000,000
10% debentures payable, next annual principal installment of
P500,000 due February 1, 2021 7,000,000
On December 31, 2020, the entity consummated a noncancelable agreement with the lender to refinance
the 12% note payable on a long-term basis.
On December 31, 2020, what total amount should be reported as current liabilities?
a. 3,500,000 c. 1,500,000
b. 3,000,000 d. 2,500,000
Problem1-13 (AICPA Adapted)

On December 31, 2020, Largo Company had a P750,000 note payable outstanding due July 31, 2021.
The entity planned to refinance the note by issuing long-term bonds.
Because the entity temporarily had excess cash, it prepaid P250,000 of the note on January 15, 2021.
In February 2021, the entity completed a P 1,500,000 bond offering. The entity will use the bond offering
proceeds to repay the note payable at maturity.
On March 31, 2021, the 2020 financial statements were authorized for issue.
What amount of the note payable should be included in current liabilities on December 31, 2020?
a. 750,000 c. 250,000
b. 500,000 d. 0

Dean Company has a P2,000,000 note payable due June 30, 2021. On December 31, 2020, the entity
signed an agreement to borrow up to P2,000,000 to refinance the note payable on a long-term basis.
The financing agreement called for borrowing not to exceed 80% of the value of the collateral the entity
was providing.
On December 31, 2020, the value of the collateral was P1,500,000.
On December 31, 2020, what amount of the note payable should be reported as current liability?
a. 2,000,000 c. 800,000
b. 1,500,000 d. 500,000

Willem Company reported the following liabilities on December 31, 2020:
Accounts payable 750,000 Short-term borrowings 750,000
Short-term borrowings 400,000
Mortgage payable, current portion P100,000 3,500,000
Bank loan payable, due June 30, 2021 1,000,000
The P 1,000,000 bank loan was refinanced with a 5-year loan on January 15,2021, with the first principal
payment due January 15, 2022.
The financial statements were issued February 28, 2021.
What total amount should be reported as current liabilities on December 31, 2020?
a. 1,150,000 c. 1,250,000
b. 2,250,000 d. 850,000

Cobb Company sells gift certificates redeemable only when merchandise is purchased. Upon redemption,
Cobb Company recognizes the unearned revenue as realized.
Information for the current year:
Unearned revenue, January 1 650,000
Gift certificates sold 2,250,000
Gift certificates redeemed 1.950,000
Gift certificates unredeemed for a long time 100,000
Cost of goods sold 60%
What amount should be reported as unearned revenue at year-end?
a. 510,000 c. 850,000
b. 570,000 d. 950,000

Regal Company sells gift certificates, redeemable for store merchandise. The gift certificates have. no
expiration date.
The entity has the following information pertaining to the gift certificate sales and redemptions:
Unearned revenue on January 1, 2020 750,000
2020 sales 2,500,000
2020 redemptions of prior year sales 250,000
2020 redemptions of current year sales250,000 1,750,000
What amount should be reported as unearned revenue on December 31, 2020? •
a. 1,250,000 b. 1, 125,000
c. 1,000,000 d. 500,000

Greene Company sells office equipment service contracts agreeing to service equipment for a two-year
period. Cash receipts from contracts are credited to unearned contract revenue. Service contract costs are
charged to service contract expense as incurred. Revenue from service contracts is recognized as earned
over the term of the contracts.
Unearned contract revenue at January 1 600,000
Cash receipts from service contracts sold 980,000
Service contract revenue recognized 860,000
Service contract expense 520,000
What is unearned service contract revenue on December 31?
a. 460,000 c. 490,000
b. 480,000 d. 720,000

Ryan Company sells major household appliance service contracts for cash. The service contracts are for
a one-year, two-year, or three-year period. Cash receipts from contracts are credited to unearned contract
revenue. This account had a balance of P720,000 on December 31, 2020 before year-end adjustment.
Service contract costs are charged as incurred to service contract expense account which had a balance
of P 180,000. Outstanding service contracts on December 31, 2020 expire during 2021 P 150,000, during
2022 P225,000 and during 2023 P100,000.
What amount should be reported as unearned contract revenue on December 31, 2020?
a. 540,000 c. 295,000
b. 475,000 d. 245,000

Dunne Company sells equipment service contracts that cover a two-year period. The sale price of each
contract is P600.
The past experience is that, of the total pesos spent for repairs on service contracts, 40% is incurred
evenly during the first contract year and 60% evenly during the second contract year.
The entity sold 1,000 contracts evenly throughout 2020.
1. What is the contract revenue for 2020?
a. 120,000 c. 300,000
b. 240,000 d. d. 150,000
2. What amount should be reported as deferred service revenue on December 31, 2020?
a. 540,000 c. 360,000
b. 480,000 d. 300,000
a. 180,000 c. 300,000
b. 360,000 d. 120,000
a. 240,000 c. 180,000
b. 360,000 d. 0

Copra Company sells appliance service contracts agreeing to repair appliances for two-year period.
The past experience is that, of the total amount spent for repairs on service contracts, 40% is incurred
evenly during the first contract year and 60% is incurred evenly during the second contract year.
Receipts from service contract sales are P500,000 for 2020 and P600,000 for 2021.
Receipts from contracts are credited to unearned service revenue. All sales are made evenly during the
year.
a. 100,000 c. 250,000
b. 200,000 d. 500,000
2. What is the unearned revenue on December 31, 2020?
a. 300,000 c. 200,000
b. 400,000 d. 150,000
a. 240,000 c. 370,000
b. 360,000 d. 250,000
4. What is unearned revenue on December 31, 2021?
a. 360,000 c. 480,000
b. 470,000 d. 630,000

Hart Company sells subscriptions to a specialized directory that is published semiannually and shipped
to subscribers on April 15 and October 15. Subscriptions received after the March 31 and September 30
cut-off dates are held for the next publication. Cash from subscribers is received evenly during the year
and is credited to deferred revenue from subscriptions.
Deferred revenue from subscriptions — January 1 1,500,000
Cash receipts from subscribers during the current year 7,200,000
What amount should be reported as deferred revenue from subscription on December 31?
a. 1,800,000
b. 3,300,000
c. 3,600,000
d. 5,400,000
Weaver Company sells magazine subscriptions for a 1-year, 2-year or 3-year period
Cash receipts from subscribers are credited to magazine subscriptions collected in advance and this
account had a balance of P1,700,000 on January 1, 2020.
The entity provided the following information for the year ended December 31, 2020:
Cash receipts from subscribers 2,100,000
Magazine subscriptions revenue
Credited on December 31, 2020 1,500,000
On December 31, 2020, what amount should be reported as the balance for magazine subscriptions
collected in advance?
a. 1,900,000 c. 1,400,000
b. 2,300,000 d. 2,100,000
Problem 1-24 .(AICPA Adapted)

Anette Video Company sells 1- and 2-year subscriptions for the video-of-the-month business.
Subscriptions are collected in advance and credited to sales. An analysis of the recorded sales activity
revealed the following:
2020 2021
Sales 420,000 500,000
Less cancelations 20,000 30,000
Net sales 400,000 470,000
Subscription expirations:
2020 120,000
2021 155,000 130,000
2022 125,000 200,000
2023 140,000
400,000 470,000
1. On December 31, 2021, what amount should be reported as unearned subscription revenue?
a. 495,000 c. 465,000
b. 470,000 d. 340,000
2. What amount should be reported as subscription revenue for 2021?

a. 175,000 c. 285,000
b. 305,000 d. 250,000
Farr Company sells products with reusable and expensive containers. The customer is charged a deposit
for each container delivered and receives a refund for each container returned within two years after the
year of delivery.
Containers held by customers on January 1, 2020, from deliveries in:
2018 75,000
2019 215,000 290,000
Containers delivered in 2020 390,000
Containers returned in 2020 from deliveries in:

2018 45,000
2019 125,000
2020 143,000 313,000
What is the liability for deposits on December 31, 2020?

a. 247,000 c. 337,000
b. 292,000 d. 367,000

Black Company required nonrefundable advance payments with special orders for machinery constructed
to customer specifications.
The entity provided the following information for the current year:
Customer advances — beginning of year 1,180,000
Advances received with orders 1,840,000
Advances applied to orders shipped 1,640,000
Advances applicable to orders canceled 500,000
What amount should be reported as current liability for advances from customers at year-end?
a. 1,480,000 c. 880,000
b. 1,380,000 d. 0
Problem 1-27 Adapted
Kent Company, a realty entity, maintains escrow accounts and pays real estate taxes for the mortgage
customers. Escrow funds are kept in interest-bearing accounts. Interest, less a 10% service fee, is credited
to the mortgagee's account and used to reduce future escrow payments.
The entity provided the following additional information for the current year:
Escrow accounts liability, January 1 700,000
Escrow payments received 1,580,000
Real estate taxes paid 1,720,000
Interest on escrow funds 50,000
What amount should be reported as escrow accounts liability on December 31?
a. 510,000 c. 605,000
b. 515,000 d. 610,000

On the first day of each month, Bell Company received from Kaye Company an escrow deposit of
P250,000 for real estate taxes. The entity recorded the P 250,000 in an escrow account.
Kaye's 2020 real estate tax is payable in equal installments on the first day of each calendar quarter.
On January 1, 2020, the balance in the escrow account was P300,000.
On September 30, 2020, what amount should be reported as an escrow liability?
a. 1,150,000 c. 850,000
b. 450,000 d, 150,000
Problem 1-29 (ACP)

Nature Company has an agreement to pay the sales manager a bonus of 5% of the entity's earnings. The
income for the year before bonus and tax is P5,250,000. The income tax rate is 30% of income after
bonus.
Required:
Determine the bonus under each of the following independent assumptions:
1. Bonus is a certain percent of the income before bonus and before tax.
2. Bonus is a certain percent of income after bonus but before tax.
3. Bonus is a certain percent of income after bonus and after
4. Bonus is certain percent of income after tax but before bonus.

Ronald Company has an incentive compensation plan under which a branch manager received 10% of
the branch income after deduction of the bonus but before deduction of income
Branch income for the current year before the bonus and income tax was P 1,650,000. The tax rate was
30%. What is the bonus for the current year?
a. 126,000 c. 165,000
b. 150,000 d. 180,000

Christian Company bonus agreement provide the general manager receive a bonus of the net income
after bonus and tax. The income tax rate is 30%. The general manager received for the current year as
bonus. What is the income before bonus and tax?
a. 4,280,000 c. 2,800,000
b. 4,000,000 d. 3,720,000

After three profitable years, Gretchen Company decided to offer a bonus to the branch manager of 25%
of income over P1,000,000 earned by the branch during the current year.
The income for the branch was P 1,600,000 before tax and before bonus for the current year.
The bonus is computed on income in excess of P 1,000,000 after deducting the bonus but before
deducting tax.
What is the bonus for the current year?
a. 120,000 c. 250,000
b. 150,000 d. 320,000

Jackson Company has an incentive compensation plan under which the president is to receive a bonus
equal to 10% of income in excess of P 1,000,000 before deducting income tax
but after deducting the bonus. The income before income tax and the bonus is P3,200,000.
What is the amount of the bonus?
a. 220,000 c. 320,000
b. 200,000 d. 440,000
Problem 1-34 Multiple choice (IAA)

1. The most common type of liability is
a. One that comes into existence due to a loss contingency.
b. One that must be estimated.
c. One that comes into existence due to a gain contingency:
d. One to be paid in cash and for which the amount and timing are known.
2. Which is not a characteristic of a liability?

a. It represents a transfer of an economic resource.
b. It must be payable in cash.
c. It arises from present obligation to other entity.
d. It results from past transaction or event.
3. Classifying liabilities as either current or noncurrent helps creditors assess

a. Profitability
b. The relative risk of an entity's liabilities
c. The degree of an entity's liabilities
d. The amount of an entity's liabilities
4. Short-term obligations are reported as noncurrent if

a. The entity has a long-term line of credit.
b. The entity has tentative plan to issue long-term bonds payable.
c. The entity has the discretion to refinance as long-term.
d. The entity has the ability to refinance on a long-term
5. Which situation would not require that noncurrent liabilities be reported as current?
a. The long-term debt is callable by the creditor.
b. The creditor has the right to demand payment due to a contractual violation.
c. The long-term debt matures within the upcoming year•
d. All of these require the current classification,
6. Which of the following represents a liability?

a. The obligation to pay for goods that an entity expects to order from suppliers next year
b. The obligation to provide goods that customers have ordered and paid for during the current
year
c. The obligation to pay interest on a five-year note payable that was issued the last day of the
year
d. The obligation to distribute an entity's own shares
7. Which does not meet the definition of a liability?

a. The signing of an employment contract at fixed salary
b. An obligation to provide goods or services in the future
c. A note payable with no specified maturity date
d. An obligation that is estimated in amount
8. Which of the following is a characteristic of a current liability but not a noncurrent liability?
a. Unavoidable obligation.
b. Present obligation to transfer an economic resource.
c. Settlement is expected within the normal operating cycle or within 12 months,
whichever is longer.
d. The obligating event has already occurred.
9. Which of the following is not considered a characteristic of a liability?

a. Present obligation
b. Arises from past event
c. Results in a transfer of economic resource
d. Liquidation is reasonably expected to require use of current assets
10. Which of the following is not an acceptable presentation of current liabilities?

a. listing current liabilities in the order of maturity
b. Listing current liabilities according to amount
c. Offsetting current liabilities against assets that are to be applied to their liquidation
d. Showing current liabilities in the order of liquidation preference

1. Among the short-term obligations at year-end are 90-day notes, renewable for another 90-day period.
What is the classification of the notes payable?
a. Current liabilities c. Noncurrent liabilities
b. Deferred credits d. Intermediate debt
2. At year-end, an entity has 120-day note payable outstanding. The entity has followed the policy of
replacing the note rather than repaying it over the last three years. The entity's treasurer says that this
policy is expected to continue indefinitely, and the arrangement is acceptable to the bank to which the
note was issued. What is the proper classification of the note in the year-end statement of financial
position?
a. Dependent on the intention of management
b. Dependent on the actual ability to refinance
c. Current liability, unless specific refinancing criteria are met
d. Noncurrent liability
3. An entity had a note payable due next year. After the end of reporting period and before the issuance
of the current year financial statements, the entity issued long-term bonds payable. Proceeds from the
bonds were used to repay the note when due. How should the entity classify the note payable at current
year-end?
a. Current liability with separate disclosure of the note refinancing
b. Current liability with no disclosure required
c. Noncurrent liability with separate disclosure of the note refinancing
d. Noncurrent liability with no separate disclosure required
4. An entity has a loan due for repayment in six months' time, but the entity has the option to refinance
for repayment two years later. The entity plans to refinance this loan. In which section of the statement
of financial position should this loan be presented?
a. Current liabilities c. Noncurrent liabilities
b. Current assets d. Noncurrent assets
5. At year-end, an entity classified a note payable as current liability. Under what condition could the
entity reclassify note payable from current to noncurrent?
a. the entity has the intent and ability to reclassify the note before the end of reporting period.
b. If the entity has executed an agreement to refinance the note before issuance of the financial
statements.
c. If the entity has the intent and ability to rec1assify the note before the issuance of the financial
statements.
d. If the entity has executed an agreement to refinance the note before the end of reporting period.
Problem 1-36 Multiple choice (AICPA Adapted)

1. The most relevant should measurement of liabilities at initial recognition should always reflect
a. The expectation of the management
b. Historical cost
c. The credit standing of the entity
d. The single most likely minimum possible amount
2. Which statement best describes the term liability?

a. An excess of equity over current assets
b. Resources to meet financial commitments when due
c. The residual interest in the assets of the entity
d. d. A present obligation arising from past event
3. What is the relationship between present value and the concept of a liability?
a. Present value is used to measure certain liabilities.
b. Present value is not used to measure liabilities.
c. Present value is used to measure all liabilities.
d. Present value is used to measure noncurrent liabilities only.
4. If a long-term debt becomes callable due to the violation of a loan covenant

a. The debt may continue to be classified as noncurrent if the covenant can be
renegotiated.
b. The debt should be reclassified as current.
c. Cash must be reserved to pay the debt.
d. Retained earnings must be restricted.
5. What is the classification of debt calläble by the creditor?

a. Noncurrent liability
b. Current liability
c. Current liability if the creditor intends to call the deb within one year
d. Current liability if it is probable that the creditor call the debt within one year

1. Advance payments from customers represent
a. Liabilities until the product is provided.
b. A component of shareholders' equity.
c. Assets until the product is provided.
d. Revenue upon receipt of the advance payment.
2. Revenue associated with gift card sales should be recognized

a. When the gift card is sold.
b. No later than the last day of the reporting period.
c. When the probability of gift card redemption is viewed as remote.
d. Under no circumstances
3. All else equal, a large increase in unearned revenue in the current period would be expected to
produce what effect on revenue in a future period?
a. Large increase because unearned revenue becomes revenue when earned.
b. Large decrease because unearned revenue implies that less revenue has been earned which
reduces revenue.
c. No effect because unearned revenue is a liability.
d large decrease because unearned revenue indicates collection problems that will reduce net
revenue in future period.
4. When a product is delivered for which a customer advance has been previously received, the
appropriate journal entry includes
a. A debit to revenue and credit to liability
b. A debit to revenue and credit to asset
c. A debit to asset and credit to revenue
d. A debit to liability and credit to revenue
5. When cash is received from customers in the form of a refundable deposit, the cash account is
increased with a corresponding increase in
a. Current liability c. Shareholders' equity
b. Revenue d. Contributed capital
Problem 1-38 Multiple choice (AICPA Adapted)

1. A department store received cash and issued a gift certificate that is redeemable in merchandise.
When the gift certificate was issued
a. Deferred revenue account should be decreased
b. Deferred revenue account should be increased
c. Revenue account should be decreased
d. Revenue account should be increased
2. A retail store received cash and issued gift certificates that are redeemable in merchandise. How
would the deferred revenue account be affected by the redemption and non-redemption of certificates,
respectively?
a. Decrease and No effect c. No effect and No effect
b. Decrease and decrease d. No effect and Decrease
3. An entity received an advance payment for special order goods that are to be manufactured and
delivered within six months. How should the advance; payment be reported?
a. Deferred charge c. Current liability
b. Contra asset account d. Noncurrent liability
4. At year-end, an entity sold refundable merchandise coupons. The entity received a. certain amount
for each coupon redeemable next year for merchandise with a certain retail price. At year-end, how
should the entity report these coupon transactions?
a. Unearned revenue at the merchandise's retail price
b. Unearned revenue at the cash received
c. Revenue at the merchandise's price
d. Revenue at the cash received
5. How would the proceeds received from the advance sale Of nonrefundable tickets for a theatrical
performance be reported in the statement of financial position before the performance?
a. Revenue for the entire proceeds
b. Revenue to the extent of related costs expanded
c. Unearned revenue to the extent of related costs expended
d. Unearned revenue for the entire proceeds
6. Magazine subscriptions collected in advance should be treated as

a. A contra account to magazine subscriptions receivable
b. Deferred revenue in the liability section
c. Deferred revenue in the shareholders' equity section
d. Magazine subscription revenue in the income statement in the period collected
7. Under a royalty agreement with another entity, an entity will receive royalties from the assignment
of a patent for four years. The royalties received in advance should be reported as revenue
a. In the period received
b. In the period earned
c. Evenly over the life of the royalty agreement
d. At the date of the royalty agreement
8. An entity is a retailer of home appliances and offers a service contract on each appliance sold.
Collections received for service contracts should be recorded as an increase in a
a. Deferred revenue account
b. Sales contracts receivable valuation account
c. Shareholders' equity valuation account
d. Service revenue account
9. An entity sells appliances that include a three-year warranty. Service calls under the warranty are
performed by an independent mechanic under a contract with the entity. Based on experience, warranty
costs are expected to be incurred for each machine sold. When should the entity recognize these
warranty costs?
a. Evenly over the life of the warranty
b. When the service calls are performed
c. When payments are made to the mechanic
d. When the machines are sold
10. At the end of the current year, an entity received an advance payment of 60% of the sales price for
special order goods to be manufactured and delivered within five months. At the same time, the entity
subcontracted for production of the special-order goods at a price equal to 40% of the main contract
price. What liabilities should be reported in the year-end statement of financial position?
a. None
b. Deferred revenue equal to 60% of the main contract price and payable to subcontractor
equal to 40% o the main contract price
c. Deferred revenue equal to 60% of the main contract price and no payable to
subcontractor
d. No deferred revenue but payable to subcontractor reported at 40% of the main contract
price
VI. References
Intermediate Accounting 2, 2020, Valix
Intermediate Accounting 2, 2020, Zeus Millan

Week 1

Uploaded by

Copyright:

Available Formats

You might also like

Week 1

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Week 1

Uploaded by

Copyright:

Available Formats

DISCLAIMER: The information content provided in this course material is designed to provide helpful

Subject Code: BAIACC2X

Course Learning Outcomes:

About the Instructor:

Without payment of money, without transfer of noncash asset,

A crystallization of the definitive concept of an accounting liability is

Cash Dividend Share Dividend

Accounting liability No accounting liability

The obligation is to issue the entity’s own shares.

Thus, share dividend payable is classified as a part

Transactions Obligating Event

Measurement of current liabilities

Measurement of noncurrent liabilities

Nature of Liability Initial Measurement Subsequent Measurement

Face Amount – 500,000

1. Financial liability measured at FVPL (i.e., 1. Noncurrent portion of long-term debt.

WHAT IS OPERATING CYLCE?

Requirement: How much is the total current liabilities?

Illustration 2: Current liabilities

Requirement: How much is the total current liabilities?

Overview of Refinancing Agreement

Can Inutil Online Selling have the option to reclassify it as non-current

Long-term debt falling due within one year

Continuation: Inutil Online Selling – Date of Settlement - 2020

Case 3: Refinancing completed as of end of reporting period

& PAS 1, paragraph 74, provides that

& The lender has agreed on or before the end Noncurrent.

Presentation of current liabilities

Journal entries for first year

2. When the gift certificates are redeemed:

Case 1 – Before bonus and before tax

Case 3 – after bonus and after tax

B = .10 [4,400,000 – B -(.30 (4,400,000 – B)]

T = .30 (4,400,000 – 287,850)

° The containers’ deposit account is usually classified as current liability.

Problem 1-1 (IAA)

Problem 1-2 (IAA)

Problem 1-4 (IAA)

Problem 1-5 (IAA)

Problem 1-6 (IAA)

Problem 1-10 (AICPA Adapted)

Problem 1-11 (AICPA Adapted)

Problem 1-12 (AICPA Adapted)

Problem1-13 (AICPA Adapted)

Problem 1-14 (AICPA Adapted)

Problem 1-15 (AICPA Adapted)

Problem 1-16 (AICPA Adapted)

Problem 1-17 (AICPA Adapted)

Problem 1-18 (AICPA Adapted)

Problem 1-19 (AICPA Adapted)

Problem 1-20 (AICPA Adapted)

Problem 1-21 (AICPA Adapted)

Problem 1-22 (AICPA Adapted)

Problem 1-23 (AICPA Adapted)

Problem 1-24 .(AICPA Adapted)

2. What amount should be reported as subscription revenue for 2021?

Problem 1-25 (AICPA Adapted)