STATEMENT OF FINNACIAL POSITION
On December 31, 2020, an entity showed the following current assets:
Cash
Accounts receivable
Inventory
Prepaid expenses
Total current assets
Cash on hand including customer postdated check of P20,000 and
employee
IOU of P10,000
Cash in bank per bank statement (outstanding checks on December
31,
2017, P70,000)
Total cash
Customers’ debit balances, net of customer deposit of P50,000
Allowance for doubtful accounts
Sale price of goods invoiced to customers at 150% of cost on December
29,
2017 but delivered on January 5, 2018 and excluded from
reported inventory
Total accounts receivable
1. What is the adjusted cash balance?
a.
b.
c.
d.
500,000
470,000
430,000
400,000
2. What is the net realizable value of accounts receivable?
.
a.
b.
c.
d.
1,970,000
1,820,000
1,800,000
1,950,000
3. What is the adjusted inventory?
a.
b.
c.
d.
2,000,000
2,375,000
2,500,000
2,750,000
4. What total amount of current assets should be reported?
a.
b.
c.
d.
4,900,000
4,830,000
4,780,000
4,630,000
500,000
2,500,000
2,000,000
100,000
5,100,000
130,000
370,000
500,000
1,900,000
( 150,000)
750,000
2,500,000
INVESTMENT IN ASSOCIATE
On January 1, 2020, an entity acquired a 10% interest in an investee for P3,000,000. The
investment was accounted for under the cost method. During 2017, the investee reported net
income of P4,000,000 and paid dividend of P1,000,000.
On January 1, 2021, the entity acquired a further 15% interest in the investee for P8,500,000. On
such date, the carrying amount of the net assets of the investee was P36,000,000 and the fair value
of the 10% existing interest was P3,500,000.
The fair value of the net assets of the investee is equal to carrying amount except for an equipment
whose fair value was P4,000,000 greater than carrying amount. The equipment had a remaining
life of 5 years.
The investee reported net income of P8,000,000 for 2021 and paid dividend of P5,000,000 on
December 31, 2021.
1. What amount of investment income should be recognized in 2020?
a.
b.
c.
d.
400,000
100,000
500,000
300,000
2. What is the implied goodwill arising from the acquisition on January 1, 2021?
a. 3,000,000
b. 2,000,000
c. 2,500,000
d.
0
3. What total amount of income should be recognized by the investor in 2021?
a.
b.
c.
d.
2,000,000
2,500,000
2,300,000
1,800,000
4. What is the carrying amount of the investment in associate on December 31, 2021?
a.
b.
c.
d.
12,550,000
12,350,000
11,950,000
12,750,000
THEORIES
1. A corporation is not:
A. owned by shareholders who enjoy the privilege of limited liability.
B. easily divisible between owners.
C. a separate legal entity with perpetual life.
D. a separate legal entity with limited life.
2. Inflation:
A. increases corporations' reliance on debt for capital expansion needs.
B. creates larger asset values on the firm's historical balance sheet.
C. makes it cheaper (in terms of interest costs) for firms to borrow money.
D. creates stability for investors.
3. Which of the following securities is not included as part of the capital market?
A. Common stock
B. Commercial paper
C. Government bonds
D. Preferred stock