Module 10 Financial Statements PDF

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Module 10 Post-test Financial Statements The following unadjusted sections of the Statement of Financial Position of the Loeb Inc. as at December 31, 2021 were presented to you. Cash P 85, Accounts receivable 282, Merchandise inventory 92, Deferred charges 8, Current assets P468,Trade accounts payab...

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1 Module 10 Post-test Financial Statements 1. The following unadjusted sections of the Statement of Financial Position of the Loeb Inc. as at December 31, 2021 were presented to you. Cash Accounts receivable Merchandise inventory Deferred charges Current assets

P 85,000 282,400 92,000 8,600 P468,000

Trade accounts payable, net of P5,000 debit balance Interest payable Income tax payable Money claims of Union pending final decision Mortgage payable due in four annual installments Current liabilities

P125,000 3,000 12,000 45,000 100,000 P285,000

A review of the above indicate that the Cash account of P85,000 included a customer’s check returned by the bank marked NSF amounting to P1,250; and employee’s IOU of P2,000; and P10,000 deposited with the courts for a case under litigation. Accounts receivable totaling P282,400 is composed of: Customers, debit balances – P181,400; Advances to subsidiaries – P20,000; Advances to suppliers – P15,000; Receivables from Loeb officers – P18,000; Allowance for Bad Debts – (P8,000); and selling price of merchandise invoiced at 140% of cost but not yet delivered – P56,000 (The goods were not included in Merchandise Inventory). Based on the above and the result of your audit, answer the following: 1. The correct total of Current Assets on December 31, 2021 is a. P410,150 c. P413,400 b. P415,150 d. P418,400 2. The correct total of Current Liabilities on December 31, 2021 is a. P170,000 c. P145,000 b. P160,000 d. P215,000 2. In connection with your audit of the Steven Co. for the year 2021, you were able to gather the following accounts are from the unadjusted trial balance of the company on December 31, 2021: Cash Accounts receivable Allowance for bad debts Notes receivable Prepaid rent expense Trading securities Merchandise inventory Accounts payable Note payable Accrued expenses Bonds payable (due semi-annually in June and December at P30,000) Income tax payable SSS and HDMF premiums payable Withholding tax payable Mortgage payable, due July 31, 2023 Contingent liability

P170,000 525,000 4,000 180,000 10,000 150,000 450,000 242,500 100,000 22,000 300,000 30,000 12,000 9,000 200,000 80,000

2 Additional information:  Cash consists of: Cash in bank per bank statement (outstanding checks, P12,000) Petty cash, including unreplenished petty cash expense vouchers of P150) Customer’s advance deposit in check dated January 15, 2022

P167,000 500 2,500 P170,000

 Accounts receivable includes P125,000 selling price of goods sent on consignment at 125% of cost and not included in the inventory.  Notes receivable include notes discounted of P80,000.  Accounts payable includes P40,000 cost of purchases in transit FOB destination but not included in the inventory. It also includes customer’s advance deposit in check dated January 15, 2022 of P2,500.  The Note Payable is a promissory note dated October 1, 2021, due March 31, 2022 with 18% interest p.a. This is in connection with a loan from a Chubby Bank. Accrued expenses exclude the interest payable on the note. Based on the above and the result of your audit, determine the amounts to be presented in Steven’s statement of financial position as of December 31, 2021 for the following: 1. Cash a. P167,500 b. P155,350

c. P155,500 d. P157,850

2. Trade and other receivables a. P496,000 b. P500,000

c. P576,000 d. P498,500

3. Total current assets a. P1,363,850 b. P1,321,250

c. P1,361,350 d. P1,261,350

4. Trade and other payables a. P243,000 b. P247,500

c. P277,500 d. P250,000

5. Total current liabilities a. P437,500 b. P440,000

c. P433,000 d. P377,500

3. Your firm has been engaged to examine the financial statements of Steven Corporation for the year 2021. The bookkeeper who maintains the financial records has prepared all the unaudited financial statements for the corporation since its organization on January 2, 2020. The client provides you with the information below.

Assets Current assets Other assets

Steven Corporation Statement of financial position December 31, 2021 Liabilities P1,881,100 Current liabilities P 962,400 Long-term 5,171,400 liabilities 1,439,500 ___________ Capital 4,650,600 P7,052,500 P7,052,500

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 An analysis of current assets discloses the following: Cash (restricted in the amount of P400,000 for plant expansion) Investment in land Accounts receivable less allowance of P30,000 Inventories

P 571,000 185,000 480,000 645,100 P1,881,100

 Other assets include: Prepaid expenses Plant and equipment less accumulated depreciation of P1,430,000 Cash surrender value of life insurance policy Unamortized bond discount Notes receivable (short term) Goodwill Land

P

47,400

4,130,000 84,000 49,500 162,300 252,000 446,200 P5,171,400

 Current liabilities include: Accounts payable Notes payable (due 2023) Income tax payable Share premium reserve

P510,000 157,400 145,000 150,000 P962,400

 Long-term liabilities include: Unearned revenue Dividends payable 8% bonds payable (due May 1, 2026)

P 489,500 200,000 750,000 P1,439,500

 Capital includes: Retained earnings Share capital, par value P10; authorized 200,0000 shares, 184,000 shares issued

P2,810,600 1,840,000 P4,650,600

The supplementary information below is also provided. a. On May 1, 2021, the company issued at 93.4, P750,000 of bonds to finance plant expansion. The long term bond agreement provided for the annual payment of interest every May 1. The existing plant was pledged as security for the loan. Use straight-line method for discount amortization.

b. The bookkeeper made the following mistakes: 1.

In 2019, the ending inventory was overstated by P183,000. The ending inventories for 2020 and 2021 were correctly computed.

2.

In 2021, accrued wages in the amount of P275,000 were omitted from the statement of financial position and these expenses were not recognized in profit or loss.

3.

In 2021, a gain of P175,000 (net of tax) on the sale of certain plant assets was credited directly to retained earnings.

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c. You learned on January 28, 2022, prior to completion of the audit, of heavy damage because recent fire to one of Steven’s two plants; the loss will not be reimbursed by insurance. The plant has a carrying amount of P1,200,000 on the date of fire. Based on the above and the result of the audit, answer the following: 1. The adjusted current assets as of December 31, 2021 is a. P1,296,100 c. P1,690,800 b. P1,505,800 d. P1,553,200 2. The adjusted current liabilities as of December 31, 2021 is a. P1,619,500 c. P1,659,500 b. P1,130,000 d. P1,419,500 3. The adjusted noncurrent liabilities as of December 31, 2021 is a. P907,400 c. P 857,900 b. P864,500 d. P1,554,000 4. The adjusted equity as of December 31, 2021 is a. P4,525,600 c. P4,329,000 b. P4,519,000 d. P4,479,000 4. The bookkeeper for Shawn Computers, Inc., reports the following statement of financial position amounts as of June 30, 2021. Current assets Noncurrent assets Current liabilities Noncurrent liabilities Owners’ equity

P2,440,500 6,285,500 1,386,000 900,000 6,440,000

A review of account balances reveals the following data. (a) An analysis of current assets discloses the following:

Cash Investment securities – trading Trade accounts receivable Inventories, including advertising supplies of P20,000

P 422,500 600,000 568,000 850,000 P2,440,500

(b) Noncurrent assets include the following: Property, plant and equipment: Depreciated book value (cost P6,560,000) P5,490,000 Deposit with a supplier for merchandise ordered for August delivery 21,500 Goodwill recorded on the books to cancel losses incurred by the company in prior years 774,000 P6,285,500 (c) Current liabilities include the following: Payroll payable P 71,500 Taxes payable 41,500 Rent payable 114,000 Trade accounts payable (net of P15,000, 6-month note, received from a supplier who purchased some used equipment on June 29, 2021, 999,000

5 Notes payable

160,000 P1,386,000

(d) Noncurrent liabilities include the following: 9% mortgage on property, plant, and equipment, payable in semiannual installment of P90,000 through to June 30, 2026 P900,000 (e) Owners’ equity includes the following: Preference share capital: 190,000 shares outstanding (P20 par value) Ordinary share capital: 1,600,000 shares at P1 par value Share premium

P3,800,000 1,600,000 1,040,000 P6,440,000

(f) Ordinary shares were originally issued for P3,910,000, but the losses of the company for the past years were charged against share premium. Based on the above and the result of the audit, determine the adjusted amounts of the following: 1. Current assets a. P2,462,000 b. P2,440,500

c. P2,477,000 d. P2,435,500

2. Noncurrent assets a. P5,490,000 b. P5,511,500

c. P6,560,000 d. P6,264,000

3. Current liabilities a. P1,401,000 b. P1,581,000

c. P1,602,500 d. P1,491,000

4. Noncurrent liabilities a. P720,000 b. P810,000

c. P900,000 d. P880,000

5. Equity a. P7,710,000 b. P8,750,000

c. P6,440,000 d. P5,666,000

5. In connection with your audit of the financial statements Shawn Corporation, you were provided with the following statement of financial position as of December 31, 2021: Shawn Corporation Statement of Financial Position December 31, 2021 Assets Current assets: Cash Trading securities Accts rec., net Inventory Other current assets Total Noncurrent assets:

Liabilities and Equity Current liabilities: P 250,000 Accounts payable P 68,000 Other current 160,000 liabilities 40,000 427,000 Total P 108,000 620,000 284,000 Long-term liabilities P1,741,000 Total liabilities Equity:

655,000 P 763,000

6 Property, plant, and equip., net Treasury shares Other noncurrent assets Total Total assets

P1,296,000 90,000

Share capital Retained earnings

P1,000,000 1,636,000

272,000 P1,658,000

Total equity

P2,636,000

Total liabilities and equity

P3,399,000

P3,399,000

The following additional information relates to the December 31, 2021, statement of financial position. (a)

Cash includes P80,000 that has been restricted for the purchase of manufacturing equipment (a noncurrent asset).

(b)

Trading securities include P55,000 of stock that was purchased in order to give the company significant ownership and a seat on the board of directors of a major supplier.

(c)

Other current assets include a P80,000 advance to the president of the company. No due date has been set.

(d)

Long-term liabilities also include bonds payable of P200,000. Of this amount, P50,000 represents bonds scheduled to be redeemed in 2022.

(e)

Long-term liabilities also include a P140,000 bank loan. On May 15, 2022, the loan will become due on demand.

(f)

On December 21, dividends in the amount of P300,000 were declared to be paid to shareholders of record on January 25. These dividends have not been reflected in the financial statements.

(g)

Cash in the amount of P380,000 has been placed in a restricted fund for the redemption of preference shares in 2023. Both the cash and the shares have been removed from the statement of financial position.

(h)

Property, plant, and equipment includes land costing P160,000 that is being held for investment purposes and that is scheduled to be sold in 2022.

Based on the above and the result of your audit, determine the adjusted amounts of the following as of December 31, 2021 1. Total current assets a. P1,526,000 b. P1,821,000

c. P1,686,000 d. P1,606,000

2. Total noncurrent assets a. P2,163,000 b. P2,003,000

c. P1,488,000 d. P2,083,000

3. Total current liabilities a. P548,000 b. P298,000

c. P458,000 d. P598,000

4. Total noncurrent liabilities a. P515,000 b. P665,000

c. P605,000 d. P465,000

5. Total liabilities

7 a. P1,063,000 b. P 763,000

c. P1,263,000 d. P1,443,000

6. Total equity a. P2,926,000 b. P2,246,000

c. P2,626,000 d. P2,716,000

7. Total liabilities and equity a. P3,309,000 b. P3,689,000

c. P3,609,000 d. P3,779,000

6. The following statement of financial position is submitted to you for inspection and review. Kimberlie Corporation Statement of Financial Position December 31, 2021 Assets Cash Accounts receivable Inventories Prepaid insurance Property, plant, and equipment Total assets Liabilities and Equity Miscellaneous liabilities Loan payable Accounts payable Share capital Paid in capital Total liabilities and equity

P 180,200 450,000 816,000 35,200 1,507,200 P2,988,600

P

14,400 304,800 301,000 536,000 1,832,400 P2,988,600

In the course of the review, you find the following data: (a)

The possibility of uncollectible accounts on accounts receivable has not been considered. It is estimated that uncollectible accounts will total P19,200.

(b)

The amount of P180,000 representing the cost of large-scale newspaper advertising campaign completed in 2021 has been added to the inventory because it is believe that this campaign will benefit sales of 2022. It is also found that inventories include merchandise of P65,000 received on December 31 and has not been recorded as a purchase.

(c)

The books show that property, plant and equipment have a cost of P2,227,200 with accumulated depreciation of P720,000. However, these balances include fully depreciated equipment of P340,000 that has been scrapped and is no longer on hand.

(d)

Miscellaneous liabilities of P14,400 represent salaries payable of P38,000, less non current advances of P23,600 made to company officials.

(e)

Loan payable represents a loan from the bank that is payable in regular quarterly installments of P25,000.

(f)

Income tax payable not shown is estimated at P73,000.

(g)

Deferred tax liability arising from temporary differences totals P178,200. This liability was not included in the statement of financial position.

(h)

Share capital consists of 6%, par P20, 25,000 preference shares and 36,000 ordinary shares, par value P1.

8 (i)

Share capital have been issued for a total consideration of P1,134,400; the amount received in excess of the par values of the shares has been reported as Paid in capital. Profit and dividends were recorded in Paid in capital.

Based on the above and the result of the audit, determine the adjusted amounts of the following: 1. Current assets a. P1,347,200 b. P1,282,200

c. P1,217,200 d. P1,462,200

2. Noncurrent assets a. P1,530,800 b. P1,190,800

c. P1,507,200 d. P1,167,200

3. Total assets a. P2,878,000 b. P2,789,400

c. P2,473,000 d. P2,813,000

4. Current liabilities a. P512,000 b. P504,000

c. P577,000 d. P600,600

5. Noncurrent liabilities a. P383,000 b. P406,600

c. P204,800 d. P433,000

6. Total liabilities a. P983,600 b. P716,800

c. P895,000 d. P960,000

7. Equity a. P1,853,000 b. P1,918,000

c. P2,096,200 d. P2,368,400

7. The bookkeeper for the Kristine Company prepared the following income statement and retained earnings statement for the year ended December 31, 2021: Kristine Company December 31, 2021 Expense and Profits Sales (net ) Less: Selling expenses Net sales Add: Interest revenue Add: Gain on sale of equipment Gross sales revenue Less: Costs of operations Cost of goods sold Correction of overstatement in last year's income due to error (net of P13,200 income tax credit) Dividend costs (P4 per share for 8,000 ordinary shares) Loss due to earthquake Taxable revenues Less: Income tax on income from continuing operations Net income Miscellaneous deductions Loss from operations of discontinued Segment X44 (net of P7,200

P1,568,000 ( 156,800) 1,411,200 18,400 25,600 1,455,200 P960,800 30,800 32,000 33,600

(1,057,200) 398,000 (

99,840) 298,160...