PRACTICE QUIZZER
STATEMENT OF FINANCIAL POSITION AND NOTES TO FINANCIAL STATEMENTS
1. Which of the following would be classified as a noncurrent asset?
a. Goods which are in process of production for sale in the ordinary course of business.
b. Cash funds that are set aside for payment of equipment to be delivered a month after the reporting period.
c. Amounts due from customers within a period of 12 to 18 months; extended within the usual credit terms of the
enterprise.
d. Debt and Equity securities acquired principally for the purpose of generating a profit from short-term
fluctuations in price or dealer’s margin.
2. When classifying assets as current and noncurrent
a. The amount at which current assets are carried and reported must reflect realizable cash value
b. Assets are classified as current if they are reasonably expected to be realized in cash or consumed during the
normal operating cycle.
c. Prepayments for items such as insurance are included in “other assets” rather than as current assets as they will
ultimately be expensed.
d. The time period by which current assets are distinguished from noncurrent assets is determined by the seasonal
nature of the business.
3. Example of adjusting events after the balance sheet date that require an entity to adjust the amounts recognized in
its financial statements, or to reconcile items that were not previously recognized are as follows, except one
a. Receipt of notice of bankruptcy of a customer.
b. A case filed against the company still pending in the Court of Appeals.
c. Sale of inventories after the balance sheet date may have evidence of net realizable value.
d. The determination after the balance sheet date of the amount of profit-sharing or bonus payments.
4. Non-adjusting events after the reporting period include all of the following, except
a. A major business combination after the end of the reporting period.
b. Expropriation of major assets by government after the reporting period.
c. Announcing a plan to discontinue an operation after the reporting period.
d. Destruction of a major production plant by fire on or before the end of the reporting period.
5. If events after reporting period indicate that the going concern assumption is not appropriate, IAS 10 requires that
a. the entity should not prepare its financial statements for the period.
b. the entity should not prepare its financial statements on a going concern basis.
c. the entity should prepare its financial statements on a going concern basis but with appropriate disclosures.
d. the entity should prepare its financial statements on a going concern basis without necessary disclosures.
6. Which is usually considered as a type I event (i.e., adjusting event) under IAS 10?
a. Receipt of information indicating that an asset was impaired at the end of the reporting period
b. Abnormally large change in asset prices or foreign exchange rates
c. A decline in fair value of investment
d. Enactment of tax laws that significantly affect current and deferred tax assets and liabilities
7. Type 2 events after the reporting period include all of the following, except
a. A major business combination after the end of the reporting period.
b. Expropriation of major assets by government after the reporting period.
c. Announcing a plan to discontinue an operation after the reporting period.
Source: IFRS and various testbanks
1
d. Destruction of a major production plant by fire on or before the end of the reporting period
8. IAS 1 applies to
I.
Consolidated financial statements (IFRS 10)
II.
Separate financial statements (IAS 27)
III.
Condensed interim financial statements (IAS 34)
a.
b.
c.
d.
I and II only
I and III only
II and III only
I, I and III
9. Identify if the statement is true of false
Statement 1: An entity shall present separately each material class of similar items
Statement 2: An entity shall present separately items of dissimilar nature or function unless they are immaterial
a.
b.
c.
d.
Both statements are true
Both statements are false
Only 1st statement is true
Only 2nd statement is true
10. Entities should separately report all of the following, except
a. Liabilities that differ in their amounts, timing and nature.
b. Assets and liabilities with different general liquidity characteristics.
c. Assets that differ in their expected function in the entity’s central operations.
d. Assets and liabilities that have been financed with different type of instruments
**************
PROBLEM 1
The following events occurred after the December 31, 2020 balance sheet date for JAMORANT Corporation.
1/15/21 P3,000,000 of accounts receivable was written off due to the bankruptcy of MEMPHIS Co., one of JAMORANT’s
major customers
2/04/21 A P5,000,000 shipping vessel of JAMORANT was completely lost at sea because of a hurricane
3/11/21 A court case involving JAMORANT as the defendant was settled and the company was obligated to pay the
plaintiff P1,500,000. JAMORANT previously recognized a P1,000,000 liability for the suit because management
and JAMORANT’s lawyers deemed it probable that the company would lose the case
3/25/21 One of JAMORANT’s factories with a carrying amount on its books of P16,000,000 was completely razed by
forest fires that erupted in its vicinity.
The management of JAMORANT Corporation completes the draft of the financial statements for the year 2020 on
February 10, 2021. On March 20, 2021, the board of directors of JAMORANT reviews the financial statements and
authorizes them for issue. Financial statements are made available to stockholders on April 2, 2021 at the annual
stockholders’ meeting where it is approved and filed with regulatory board the very next day. The total amount to be
disclosed in notes to financial statements by JAMORANT as event after balance sheet date is
Source: IFRS and various testbanks
2
Suggested Answer:
P 5,000,000
•
•
•
•
1/15/2021 –Bankruptcy of customer occurring after the end of reporting period is an adjusting event
2/04/2021 – Non adjusting event
3/11/2021 – Settlement after the reporting period of a court case confirming that the entity had a present obligation at the
end of the reporting period is an adjusting event
3/25/2021 – beyond the timeframe of ‘events after reporting period’
PROBLEM 2
On December 31, 2020, KOBE Company presented the following current assets:
Cash
3,200,000
Accounts receivable
2,000,000
Inventory
2,800,000
Initial direct cost in leasing equipment to a lessee
in a sales-type lease
200,000
The accounts receivable consisted of the following items:
Customers’ accounts
Accounts receivable – assigned (net of equity
of consignee in accounts assigned, P60,000)
Advances to subsidiary
Allowance for sales return
Claim against shipper for goods in transit
Subscription receivable due on December 31, 2021
1,420,000
240,000
260,000
(120,000)
100,000
100,000
What amount should be recognized as total current assets on December 31, 2020?
Suggested Answer:
Cash
Accounts Receivable
Inventory
TOTAL
3,200,000
1,800,000 (see below)
2,800,000
7,800,000
Accounts Receivable
-Customers' accounts
1,420,000
-Assigned receivables
300,000 (P240,000 + P 60,000)
-Advances to subsidiary
- Non-current receivable
-Allowances for sales return -120,000
-Claims receivable
100,000
-Subscription receivable
100,000
TOTAL
1,800,000
PROBLEM 3
Source: IFRS and various testbanks
3
Omar Company presented the following information on December 31, 2020:
Cash
1,320,000
Investment securities held for trading, including long-term
investment of P550,000 in ordinary shares
2,200,000
Inventories, including goods received on
consignment of P220,000
880,000
Prepaid expenses, including a deposit of P55,000
made on inventories to be delivered in 15 months
165,000
Property, plant & equipment
11,000,000
Goodwill, solely based on skill of employees
estimated by the president
1,100,000
Total assets
16,665,000
Cash in general checking account
Sinking fund to retire bonds payable in 2022
Cash held to pay value added taxes
Total cash
660,000
550,000
110,000
1,320,000
What total amount of current assets should be reported on December 31, 2020?
Suggested Answer:
Cash
FVTPL
770,000
(P 1,320,000 - P 550,000)
1,650,000
( P2,200,000 - P 550,000)
Inventories
660,000
( P 880,000 - P 220,000)
Prepayment
110,000
(P 165,000 - P 55,000)
TOTAL
3,190,000
PROBLEM 4
LUKA Company provided the following account balances and related information on December 31, 2020:
Cash in bank, net of bank overdraft of P300,000 in another bank
1,000,000
Cash set aside by the Board of Directors for the purchase of a plant site
2,000,000
Petty cash
10,000
Cash withheld from wages for income tax of employees
190,000
General cash
700,000
Cash and cash equivalents
3,900,000
Accounts receivable
1,500,000
Allowance for doubtful accounts
( 200,000)
Inventory
2,000,000
Prepaid insurance
300,000
`7,500.000



The accounts receivable balance included past due accounts in the amount of PI00,000. The account was deemed
uncollectible and should be written off.
The inventory included the following items and neither of these items had been recorded as a purchase.
- Goods held on consignment amounting to PI50,000
- Goods of P200,000 purchased and received on January 2, 2021 marked Free Alongside (FAS) and is in transit as
of December 31, 2020.
The prepaid insurance included cash surrender value of life insurance of P50,000.
Source: IFRS and various testbanks
4
1.
2.
3.
4.
What amount of cash and cash equivalents should be reported on December 31,2020?
What is the amortized cost of accounts receivable on December 31, 2020?
What amount of inventory should be reported on December 31, 2020?
What amount of total current assets should be reported on December 31, 2020?
Suggested Answer:
Cash and Cash Equivalents
Cash in Bank
Petty cash
1,300,000
10,000
Cash withheld from wages
190,000
General Cash
700,000
TOTAL
(P 1,000,000 + P 300,000)
2,200,000
Receivables
Account Receivable
Allowance for doubtful
1,400,000
-100,000
TOTAL
1,300,000
Inventory
1,850,000
Prepaid Insurance
TOTAL CURRENT ASSETS
250,000
(P 1,500,000 - P 100,000)
(P 200,000 - P 100,000)
(P2,000,000 - P 150,000)
(P 300,000 - P 50,000)
5,600,000
PROBLEM 5
KAWHI Company had the following liabilities on December 31,2020:
Accounts payable
55,000
Unsecured note payable, 8% due 7/1/2022
400,000
Accrued expenses
35,000
Contingent liability
450,000
Deferred tax liability
25,000
Term bonds payable, 7%, due 3/31/2021
1,000,000
The contingent liability is an accrual for possible loss on a PI,000,000 lawsuit filed against the entity. The legal counsel
expects the suit to be settled in 2021 and has estimated that the entity will be liable for damages in the range of
P450,000 to P750,000. The deferred tax liability is not related to an asset for financial reporting and is expected to
reverse in 2021.
What amount should be reported on December 31, 2020 for current liabilities?
Suggested Answer:
Accounts payable
55,000
Accrued expenses
35,000
7% Term bonds payable 1,000,000
TOTAL
1,090,000
Source: IFRS and various testbanks
5