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Financial accounting reviewer chapter 1

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CHAPTER 1
STATEMENT OF FINANCIAL POSITION
Basic problems
Problem 1-1 (IFRS)
Darwin Company provided the following information at year-end:
Cash 1,500,000
Accounts receivable 1,200,000
Inventory, including inventory expected in the ordinary
course of operations to be sold beyond 12 months
amounting to P700,000 1,000,000
Financial asset held for trading 300,000
Equity investment at fair value through other comprehensive income 800,000
Equipment held for sale 2,000,000
Deferred tax asset 150,000
What amount should be reported as total current assets at year-end?
a. 6,000,000
b. 4,000,000
c. 6,800,000
d. 4,800,000
Solution 1-1 Answer a
Cash 1,500,000
Accounts receivable 1,200,000
Inventory 1,000,000
Financial asset held for trading 300,000
Equipment held for sale 2,000,000
Total current assets 6,000,000
In the absence of statement to the contrary, equity investment at fair value through other
comprehensive income shall be classified as noncurrent asset.
Under IFRS, deferred tax asset is a noncurrent asset.
Under IFRS, noncurrent asset held for sale is a current asset.

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Problem 1-2 (AICPA. Adapted)
Petite Company reported the following current assets on December 31,2018:
Cash 5,000,000
Accounts receivable 2,000,000
Inventory, including goods received on consignment P200,000 800,000
Bond investment at fair value through other comprehensive income 1,000,000
Prepaid expenses, including a deposit of P50,000 made
on inventory to be delivered in 18 months 150,000
Total current assets 8,950,000
Cash in general checking account 3,500,000
Cash fund to be used to retire bonds payable in 2020 1,000,000
Cash held to pay value added taxes 500,000
Total cash 5,000,000
500,000 5,000,000
What total amount of current assets should be reported on December 31, 2018?
a. 6,750,000
b. 6,700,000
c. 7,700,000
d. 7,750,000
Solution 1-2 Answer b
Cash (3,500,000 + 500,000) 4,000,000
Accounts receivable 2,000,000
Inventory ( 800,000 - 200,000) 600,000
Prepaid expenses ( 150,000 - 50,000) 100,000
Total current assets 6,700,000
The goods received on consignment should be excluded from inventory.
The cash fund to be used to retire bonds payable in 2020 should be classified as noncurrent
because the bonds mature in more than one year.
The bond investment at fair value through other comprehensive income is a noncurrent asset.
Problem 1-3 (AICPA Adapted)
Rice Company was incorporated on January 1, 2018 with P5,000,000 from the issuance of share
capital and borrowed funds of P1,500,000. During the first year, net income was P2,500,000.
On December 15, the entity paid a P500,000 cash dividend. On December 31, 2018, the liabilities
had increased to P1,800,000.

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CHAPTER 1 STATEMENT OF FINANCIAL POSITION Basic problems Problem 1-1 (IFRS) Darwin Company provided the following information at year-end: Cash Accounts receivable Inventory, including inventory expected in the ordinary course of operations to be sold beyond 12 months amounting to P700,000 Financial asset held for trading Equity investment at fair value through other comprehensive income Equipment held for sale Deferred tax asset 1,500,000 1,200,000 1,000,000 300,000 800,000 2,000,000 150,000 What amount should be reported as total current assets at year-end? a. 6,000,000 b. 4,000,000 c. 6,800,000 d. 4,800,000 Solution 1-1 Answer a Cash Accounts receivable Inventory Financial asset held for trading Equipment held for sale Total current assets 1,500,000 1,200,000 1,000,000 300,000 2,000,000 6,000,000 In the absence of statement to the contrary, equity investment at fair value through other comprehensive income shall be classified as noncurrent asset. Under IFRS, deferred tax asset is a noncurrent asset. Under IFRS, noncurrent asset held for sale is a current asset. Problem 1-2 (AICPA. Adapted) Petite Company reported the following current assets on December 31,2018: Cash Accounts receivable Inventory, including goods received on consignment P200,000 Bond investment at fair value through other comprehensive income Prepaid expenses, including a deposit of P50,000 made on inventory to be delivered in 18 months Total current assets Cash in general checking account Cash fund ...
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