FAR124 FAR 124 Ncahfs - Lecture notes 1-3w PDF

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0961 -718-5293; 0936-407-4780; (02)-8376-0405 arccpalereview Page 1 of 8STUDENT HANDOUTSFINANCIAL ACCOUNTING AND REPORTING CABARLES/SAGOT/CAYETANOFAR .126— TRADE LIABILITIES OCT 2021 CPALE REVIEWnullLEARNING OBJECTIVES Initial measurement of NCA held for sale Impairment loss on initial measurement G...

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STUDENT'HANDOUTS' FINANCIAL'ACCOUNTING'AND'REPORTING' ' FAR.126—TRADE'LIABILITIES'' ' '

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''''''''''''''''''''CABARLES/SAGOT/CAYETANO' ' ''''''''''''''OCT'2021'CPALE'REVIEW'

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LEARNING(OBJECTIVES( !

1. 2. 3. 4.

Initial measurement of NCA held for sale Impairment loss on initial measurement Gain or loss on disposal Additional impairment or reversal on year-end.

5. Initial measurement when reclassified back to PPE 6. Gain or loss on reclassification back

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REVIEW(NOTES( !

CURRENT LIABILITIES: • Liabilities expects to be settled within the entity’s operating cycle. • The entity holds the liability primarily for the purpose of trading. • The liability is due to be settled within twelve months after the reporting period. • The entity does not have an unconditional right to defer settlement.

TRADE ACCOUNTS PAYABLE: Liabilities arises from purchase of inventory on account. Trade accounts payable ending balance can be computed as follows: Beginning to Ending: Beginning balance Purchase on account Payments Purchase returns Purchase discounts Ending balance

P ( ( ( P

Unadjusted to adjusted: Unadjusted balance Unreleased check Post-dated check Reversal of discount (net method) Goods in transit Goods in transit (refer below) Adjusted balance

P

( P

XX XX XX) XX) XX) XX

XX XX XX XX XX XX) XX

Goods in transit:

W/ transfer of title W/o transfer of title

Already Unrecorded No adjustment Minus

Not yet Recorded Add No adjustment

ACCRUED EXPENSES: Expenses already incurred but not yet paid, example of accrued expense are: a. b. c. d.

Salaries payable Interest payable Rent payable Commission payable

e. Utilities payable f. Advertising payable

Accrued expense: Beginning balance Expense incurred Payment made Ending balance

P ( P

XX XX XX) XX

Bonus Formula: B = Bonus amount BR = Bonus rate P = Profit before bonus and tax

T = Tax TR = Tax rate

a. Bonus based on profit before bonus and tax B = BR (P) b. Bonus based on profit after bonus and before tax B = BR (P – B) c. Bonus based on profit before bonus after tax B = BR (P – T) T = TR (P – B) d. Bonus based on profit after bonus and after tax B = BR (P – B – T) T = TR (P – B)

UNEARNED INCOME: Advance payment made by customer for goods or services to be delivered in the future. The following are example of unearned income a. Advances from customer b. Unearned income c. Gift certificate sold Unearned income: Beginning balance Cash receipt Goods / services delivered Ending balance Unearned income from gift certificate: Beginning balance Cash receipt Gift certificate redeemed Gift certificate expired Ending balance

P ( P

P ( ( P

XX XX XX) XX

XX XX XX) XX) XX

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FAR$|$FAR.126—CURRENT$LIABILITIES$

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PRESENTATION OF LIABILITIES: LIABILITIES COMMONLY CURRENT: a. Trade account payable – always current b. Note payable: - Within 12 months, current - Beyond 12 months, noncurrent - Silent, current c. Accrued expenses: - Trade, always current - Non trade: • Within 12 months, current liability • Beyond 12 months, noncurrent liability • Silent, current liability • d. Unearned income: - Within 12 months, current liability - Beyond 12 months, noncurrent liability - Silent, current liability e. Provisions: - Within 12 months, current liability - Beyond 12 months, noncurrent liability - Silent, current liability f.

Dividends: - Cash dividend, current liability - Property dividend, current liability - Scrip dividend, current liability - Liquidating dividend, current liability - Share dividend, not liability

g. Bank overdraft: - Different bank, current liability - Same bank, not liability - Silent, current liability h. Advances from: - Employees, current liability - Customers, current liability - Suppliers, current liability - Officers, noncurrent liability - Shareholders, noncurrent liability - Subsidiaries, noncurrent liability - Associates, noncurrent liability i.

Currently maturing long-term debt: - General rule, current liability - Exception (will be presented as NCL): • Refinanced on or before reporting date • The company has the discretion • Grace period given on or before reporting date

LIABILITIES COMMONLY NONCURRENT: a. Bonds payable (+premium, – discount) - Within 12 months, current liability - Beyond 12 months, noncurrent liability - Silent, noncurrent liability b. Mortgage payable - Within 12 months, current liability - Beyond 12 months, noncurrent liability - Silent, noncurrent liability c. Lease liability - Portion payable within 12 months, current liability - Portion payable beyond 12 months, noncurrent liability d. Deferred tax liability - Always classified as noncurrent liability

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DISCUSSION(QUESTIONS( !

1. Krillin, Inc. is preparing its financial statements for the year ended December 31, 2019. Accounts payable amounted to P200,000 before any necessary year-end adjustment related to the following: •

At December 31, 2019, Krillin has a P50,000 debit balance in its accounts payable to Vegito, a supplier, resulting from a P50,000 advance payment for goods to be manufactured to Krillin specifications.

•

On December 27, 2019, Krillin wrote and recorded checks to creditors totaling P30,000 that were mailed on January 10, 2020.

•

Checks in the amount of P25,000 were written to vendors and recorded on December 29, 2019. The checks were dated January 5, 2020.

What amount should Krillin report as accounts payable in its December 31, 2019 statement of financial position? A. 305,000 C. 275,000 B. 280,000 D. 205,000 2. The balance in Denver Company’s accounts payable account at December 31, 2019 was P1,100,000 before any adjustments relating to the following: •

•

•

The bill for December’s utility cost of P30,000 was received and paid on January 10, 2020.

•

A P20,000 advertising bill was received on January 2, 2020. Of the total billing, P15,000 pertain to advertisements in December 2019 and P5,000 pertain to advertisements in January 2020.

•

A lease, effective December 16, 2018, calls for a fixed rent of P100,000 per month, payable one month after the commencement of the lease and every month after thereafter. In addition, rent equal to 5% of net sales over P1,000,000 per year is payable on January 31 of the following year.

•

Total cash sales and collections on accounts amounted to P1,000,000. Accounts receivable has a net increase of P200,000. Commissions of 15% of sales are paid on the same day cash is received from customers.

What is the accrued liabilities on December 31, 2019? A. 285,000 B. 135,000 C. 125,000 95,000 D.

Goods were in transit to Denver Company on December 31, 2019. The invoice cost was P150,000, FOB shipping point Accrued Expenses – Bonus Payable on December 29, 2019. The goods were received on Numbers 4, 5, 6 and 7 January 2, 2020. Adhere Company grants its managerial employees bonus in the form of profit sharing. Information on operations in 2019 is shown below: Goods shipped FOB shipping point on December 20, 2019 Profit before bonus & tax from a vendor to Denver Company, were lost in transit. The 4,000,000 invoice cost was P100,000. On January 5, 2020, Denver Bonus rate or percentage Company filed an P100,000 claim against the common 10% carrier. Income tax rate 30%

•

Goods shipped FOB destination on December 21, 2019, from a vendor to Denver Company, were received on January 6, 2020. The invoice cost was P195,000.

•

On December 28, 2019, Denver Company wrote and recorded checks totaling P70,000 which were mailed on January 8, 2020.

The amount that Denver Company report as accounts payable on its December 31, 2019 balance sheet is A. 1,420,000 B. 1,170,000 C. 1,225,000 D. 1,320,000 arious Accrued Expenses 3. Tatay Company is preparing its December 31, 2019 financial statements. The following information was gathered:

4. A. B. C. D.

How much is the bonus “before bonus and before tax”? 363,636 280,000 400,000 288,660

5. A. B. C. D.

How much is the bonus “after bonus and before tax”? 400,000 363,636 261,684 245,798

6. A. B. C. D.

How much is the bonus “before bonus and after tax”? 363,636 261,684 245,798 288,660

7. A. B. C.

How much is the bonus “after bonus and after tax”? 363,636 261,682 245,798

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288,660

nearned Income – Unearned Revenue umbers 8, 9, 10 and 11 unne Company sells equipment service contracts that cover two ear period. The sale price of each contract is P600. he past experience is that, of the total peso spent for repairs on ervice contracts, 40% is incurred evenly during the first contract ear and 60% evenly during the second contract year. The entity old 1,000 contract evenly throughout 2019. 8. A. B. C. D.

What is the contract revenue for 2019? 120,000 240,000 300,000 150,000

9. What amount should be reported as deferred service revenue on December 31, 2019? A. 540,000 B. 480,000 C. 360,000 D. 300,000 10. What is the contract revenue for 2020? A. 180,000 B. 360,000 C. 300,000 D. 120,000 11. What is the contract revenue for 2021? A. 240,000 B. 360,000 C. 180,000 D. 0

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