CHAPTER 3THE STATEMENT OF FINANCIAL POSITION AND NOTES TO THE FINANCIAL STATEMENTS Discussion Question 15 1. C 15. B 2. C 16. B 3. B 17. E 4. E 18. A 5. A 19. B 6. B 20. F 7. E 21. E 8. A 22. B 9. D 23. E 10. E 24. A 11. C 25. F 12. B 26. B 13. A 27. D 14. F (shown on the face of the statement of changes in equity) 3-1. (GARNET COMPANY) Garnet Company Statement of Financial Position December 31, 2012 Assets Current assets Note Cash and cash equivalents P 35,000 Trading securities 61,000 Trade and other receivables (5) 107,000 Inventory 322,000 P 525,000 Non-current assets Property, plant and equipment (6) P1,483,000 Investment property 1,000,000 Investments in associates 250,000 Intangibles (7) 141,000 2,874,000 TOTAL ASSETS P3,399,000 Liabilities and Shareholders’ Equity Current liabilities Trade and other payables (8) P 336,000 Income tax payable 150,000 P 486,000 Noncurrent liabilities Bonds payable (9) 701,000 Deferred tax liability 50,000 751,000 Shareholders’ equity Share capital (10) P 1,534,000 Additional paid in capital (11) 321,000 Retained earnings (12) 307,000 2,162,000 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY P3,399,000 8 000 910.440.000 Less accumulated depreciation 530.000 Share premium -ordinary 240.000 Note 12 – Retained earnings Appropriated P 45.000 273.Chapter 3 – The Statement of Financial Position and Notes to the Financial Statements Note 5 – Trade and other receivables Accounts receivable P115.000 Total P321.300.000 Unappropriated 262.000 Total P336.000 Total property.000 Note 6 – Property.000 Total P141.000 Less accumulated depreciation 351.000 Less discount on bonds payable 69.000 Net trade and other receivables P107.000 9 . plant and equipment Land P 300.000 Note 7 – Intangibles Patents P120.000 Ordinary share capital. P10 par 1.000 Note 9 – Bonds payable Bonds payable (due 2014) P 770. plant and equipment P1.000 Less accumulated amortization 17.000 Share dividends distributable 24.000 Less accumulated amortization 22.000 Trademarks P 60.534.000 Total retained earnings P307.000 Note 10 – Share capital Preference share capital.000 Buildings P1.000 43.000 Note 8 – Trade and other payables Accounts payable P236.000 Total P1.000 Withholding taxes payable 80.000 Equipment P 624.000 Total P701.000 Salaries payable 20.000 Note 11 – Additional paid-in capital Share premium -preference P 81.000 P 98.000 Less allowance for bad debts 8. P100 par P 210.483. 579.000 Income tax payable 247.000 P1.000.000 3.204.000 Liabilities and Shareholders’ Equity Current liabilities Trade and other payables P 580.000 Financial assets held for trading (Note 5) 160.769.000 Raw materials 222.000 Additional paid in capital (Note 14) 537.000 Other financial assets (Note 10) 339.Chapter 3 – The Statement of Financial Position and Notes to the Financial Statements 3-2.000 Trade and other receivables (Note 6) 308.000 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY P5.000 Net trade receivables P308.000 Noncurrent liabilities Bonds payable (Note 12) 848. are reported at market values.000 10 .000 Note 7 – Inventories (at lower of cost and NRV) Finished goods P416.000 TOTAL ASSETS P5. 2012 Assets Current assets Cash and cash equivalents P 116. plant and equipment (Note 9) P3.579.000 3.000 Shareholders’ equity Share capital (Note 13) P2.769.000 Unearned revenues 62.028.810.000 Non-current assets Property. (RUBY CORPORATION) Ruby Corporation Statement of Financial Position December 31.000 Note 5 – Financial assets held for trading Financial assets held for trading.000 Goods in process 347.248.000 Prepaid expenses 31.000 Inventories (Note 7) 985. Note 6 – Trade and other receivables Accounts receivable P323.000 Retained earnings 1.000 Provision for product warranty 73.000 Total P985.000 Intangible assets (Note 11) 182.000 Less Allowance for bad debts 15.000 P 962. costing P150.000 Non-current assets held for sale (Note 8) 210. 000 Add Premium on bonds payable 48.000 Total P3. property held for future development and subsequent use as owner-occupied property is part of property.000 Share premium .000 Less accumulated depreciation 212.000 1.000 Buildings P1.000 Less accumulated depreciation 622. which conventionally was classified as long-term investment.000 Total P182. 9 of IAS 40.Chapter 3 – The Statement of Financial Position and Notes to the Financial Statements Note 8 – Non-current assets held for sale This classification represents a unit of machinery with carrying amount of P240.204.628.000 representing loss from measurement to fair value less cost to sell of asset held for sale.320.824.000 Note 13 – Share Capital Preference share capital P 400.000 213.000 318.000 • Land held for future use. at amortized cost P250.000 and fair value less cost to sell of P210.000 Less Accumulated amortization 18. is not qualified to be reported as Investment Property under par.000 Retained earnings is adjusted by a decrease of P30.000 Total P339.000.000 Note 11 – Intangible assets Patents P200.000 Ordinary share capital 1.000.000 Cash surrender value of life insurance 89. Thus. 11 .000 Note 12 – Bonds payable Bonds payable P800.000 Equipment P 530. Note 10 – Other financial assets Investment in XYZ bonds.248.028. Note 9 – Property. The sale is expected to be consummated in May 2013.202.000 Less accumulated depreciation 106.000 Land held for future use* 195.000 Total P537. plant and equipment Land P1.000 Total P848.preference P234.000 Note 14 – Additional paid in capital Share premium . thus retained earnings balance is P1. plant and equipment.000 Machinery P 319.000 Total P2.ordinary 303. 000 Note 7 – Property.040.000 Noncurrent assets Property.000 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY P6.000 Financial assets at fair value through OCI 1.000 Inventory 600.000 Less Allowance for uncollectible accounts 80.Chapter 3 – The Statement of Financial Position and Notes to the Financial Statements 3-3. P10 par P1.000 Total P130.000 Liabilities and Shareholders’ Equity Current liabilities Trade and other payables (Note 8) P1.000 Prepaid expenses (Note 6) 130.000 Retained earnings 2.560.030.450.000 Total 4.000 Prepaid insurance 50.000 Trade and other receivables (Note 5) 510.000 Total P3.790. plant and equipment Land P 810.000 Treasury shares.000 Less accumulated depreciation 920. plant and equipment (Note 7) P3.000 5.000.000 Deferred tax asset 70.540.000 Financial assets at fair value through profit or loss 320.000 2.000 12 .000 Shareholders’ equity Ordinary share capital.200.000 P1.300.000 Share Premium 1.020.390.000 Intangible assets 470.000 TOTAL ASSETS P6.000) Accumulated holding gains (losses) – investments through other comprehensive income 120.000 Buildings and equipment P3.810.000 Note 6 – Prepaid expenses Office supplies P 80. 2012 Assets Current assets Cash P 230.000 P1.450. at cost (330.000 Net trade receivables P510.000 Unearned rent 90.810. (DIAMOND COMPANY) Diamond Company Statement of Financial Position December 31.000 Noncurrent liabilities Bonds payable (Note 9) 1.000 Note 5 – Trade receivables Accounts receivable P590.480.640. 125.430.Chapter 3 – The Statement of Financial Position and Notes to the Financial Statements Note 8 – Trade and other payables Accounts payable P 990.000 Provision for warranties 200.000 Mortgage payable 1. 2012 Assets Current assets Note Cash P 380.000 Non-current asset held for sale (7) 1.000 Liabilities and Shareholders’ Equity Current liabilities Trade and other payables (12) P 1.000 Trading securities (5) 485.580.100.670.000 Investment property (9) 2. plant and equipment (8) P 5.000 Total Liabilities P 9.750.030.600.700.605.000 3-4.585.000 Bonds payable (14) P 4.000 Treasury shares.780.645.000 Total P1.000.000 Trade and other receivables (6) 2.700.645.200.000 Other financial assets (10) 1.000 Noncurrent assets Property.600.000. at cost (180.600.000 P 2.000 13 .000 Less discount on bonds payable 100.945.000 Retained earnings after recognition of gain P3.000 Income taxes payable 720.000 P 5.000 11.000 Taxes payable 250.000 Share premium 1.000 Note 9 – Bonds payable Bonds payable P1.000 Unrealized gain on trading securities 25.000 Retained earnings 3.000 Prepaid expenses 290.000) 6.820.390.000 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY P16.000 7.000 Total P 7.000 Inventories 450.000 Intangibles (11) 960.000 Net P1.000 Shareholders’ equity Share capital (15) P 1.060.000 Noncurrent liabilities Notes payable (13) 1.000 Retained earnings before adjustment P3.000 TOTAL ASSETS P16.900.605. (EMERALD COMPANY) Emerald Company Statement of Financial Position December 31.000 Salaries payable 150. 000) 1.000 Note 10 – Intangibles Patents P820.540.000 Total P1.960.000 Notes receivable (due July 1. 2013) 1.000 Note 9 – Other financial assets Investment in Day Corporation bonds (market.000 Total P 960.000 Total P2.000 1.000 Total P1. As of December 31.000 Note 12 – Notes payable The notes payable was issued on June 30. 2012. costing P460. Its fair value less cost to sell at December 31.340. 2014.000 P 590.000.000.000 Trademarks P520. 2011 and matures on June 30.750.900.780.000 Total P5.000 Current portion of mortgage payable 400.200.000 Less accumulated amortization 150. P906.000 Wages payable 410.000 Allowance for uncollectible accounts (70.430.000 370.000 Equipment P2. 2012 was P1.000 Note 11 – Trade and other payables Accounts payable P 940. 2013. Note 8 – Property.700.000 Buildings P4.850.000 Note 9 – Investment property Land P1.660.000. are reported at market value.600. Note 13 – Bonds payable Bonds payable P4.000) P 900. the company has negotiated with the lender to extend the maturity date to June 30.Chapter 3 – The Statement of Financial Position and Notes to the Financial Statements Note 5 – Trading securities The trading securities.000 Add premium on bonds payable 430. The sale is highly probable as the plan for its sale has already been completed at yearend.000 14 .000 Less accumulated depreciation 1.400.000.000 Note 7 – Noncurrent asset held for sale The non-current asset held for sale represents land that is available for immediate sale and its carrying amount will be recovered through a sale transaction.300.000) Net trade and other receivables P2. plant and equipment Land P1.000 Accumulated depreciation (300. Note 6 – Trade and other receivables Accounts receivable P1.000 Sinking fund for bond retirement 700.800.000 Less accumulated amortization 230.000 Less accumulated depreciation 1.000.600.000 2.000 Building P2.400.000 Total P4. 000) 1.000 Total current liabilities P 3.000) 1.000 Ordinary share capital 1.000 + 100.000 Accounts receivable (net) 800.000 Bank notes payable 100.000 + 540.12) x .160. (OPAL COMPANY) Current assets consists of Cash (400.10 x 6/12) 125. the company has no discretion yet to refinance the obligation on a long-term basis.995.500.000 Merchandise inventory 1.8% x 105/360) 1.000 + 150. (TURQUOISE COMPANY) Current liabilities consist of Accounts payable P 270.737.000) 1.000 Accrued interest on bonds payable (2.000 Securities held for trading 900.000) P 740.000 Total current assets P 5.000 Current portion of bonds payable 500.000 Total P1.407. 2012. (SAPPHIRE COMPANY) Current assets consist of Cash (1.000 – 50.000 Notes payable (1.688.000 + 500.210.Chapter 3 – The Statement of Financial Position and Notes to the Financial Statements Note 14 – Share capital Preference share capital P 600.195.000 – 40.000) P 955.000 + 30.000 Total current liabilities P2. 3-7.000 + 20.000 Current liabilities consist of Trade accounts payable (750.000 allowance for bad debts) 1.000 Interest payable 7.000 – 300.100.852.000 – 150.700.000 1.000 Inventories (1.000 + 50.000 Customer deposit 50.220.000 Notes receivable 920.000) 200.200.000 Income taxes payable 280.300.000 Note: The entire amount of mortgage notes payable is classified as current liabilities because as of December 31.000 Creditor’s account with debit balance 100.12 288. The refinancing of the mortgage payable in 2013 is non- adjusting event that requires disclosure in the notes to the financial statements.000 Income taxes payable (186.000 3-5.200.000 3-6.5M x .000/1. 2010 P2.000 680.000.000 Prepaid insurance (250.500 VAT payable (2.000 – 500.360.000 .000 + 25.500 – 70.000 – 60.000) 116.000 x 4.000 15 .240.000 Withholding tax payable 120.000 Trade accounts receivable (net of P60.30.000 Employees income tax withheld 40.000+ (500.500 Provision for damages 650.000 Mortgage notes payable 1.000 Total current assets at December 31. 500.400. if the amount of P180.000) Total current assets at December 31. (PERIDOT COMPANY) Trading Accounts Cash securities receivable Inventory Reported amounts P536.000 P500.000 3-10.000 (b) Treasury shares (500.500 Office supplies 3.000 Correct balances.000 Advances from suppliers 150.000* Correct totals P3.000 P8.000 Income tax payable 16.000 P7.500.000 (d) Goods out on consignment 135.000 Accrued interest on bonds payable 17. December 31.755.000. an adjustment deducting P12.400.000 210.000 3-8.918.995.000 (d) Advances and commissions payable 210. (AQUAMARINE COMPANY) Current Non-current Current Non-current assets assets liabilities liabilities Reported totals P3.000 Bank overdraft 20.000 Current liabilities: Accounts payable P124. 2010 P2.000 P3.850.000) 120.000 (e) Provision for damages 168.000.000 P550.000 Citibank current account 98.000 – 12.000 Provision for warranties 60.000 140.000 P3.000 P2.000 (b) Increase in market value 50.000 was already included in the current liabilities total of P2.285.000 (c) Goods shipped FOB destination (180.000 P136.580.000 Working capital P 88. (ZIRCON COMPANY) Current assets: Accounts receivable (net)=148.Chapter 3 – The Statement of Financial Position and Notes to the Financial Statements OR Reported total current assets P4.000) Unreplenished petty cash expenses (15.880.500 Total current assets P455.000 from current liabilities is appropriate in order to bring the provision for damages to the correct amount of P168.000 P3.000.000 P2.000 380.000 *Alternatively.500.000 (a) Post dated check recorded 80. 3-9. 2012 P616.000 P2.080.000 Inventories 217.700.000 P3.000 (a) Sinking fund cash 380.000 P3.000 Cash for purchase of plant site (1.000 16 .000 367.105.000) (c) Cash fund for taxes 140. 700.000 + 970. A 6.000 – 95.500. C 5.000 – 25.000 + 10.000 – 2.000) + 4.000)=3.000.000 MC28 B 2.000 = 1.695.000 + 108.000 – 400.000 MC41 D 675.000 + 200.000 MC45 C 500.000 + (122.000=569.000 + (75.000 MC33 C 376.000 MC38 D 160.000 + 224.000 + 500.000 + 300.750.000 + 720.000/5)=1.000 – 654. A 8.808.250.100.000 + (150.000.500.000 MC29 D 4.000 – 200.000) + (1.000) = 1.000 + 12.000 + 150.000 MC50 A 250.000+65.000 = 590.000 – 250.200.000 MC40 B 25.000– 60.000 MC27 B 3.000.700.000 + 100.020.000 MC52 B (950.50) + 2.000 MC42 A 1.000 + 3.008.000 + 5.000 – 500.680.000) =2.500.000 – (4.000) + 7.000 + 240.000 + 50.000 + 300.000 – 1.000) + 100.055.000 + 200.475.000 + 79.000 + (280.000 MC36 A 2.740. C 10.000 + 550.000 + 1.000 + 140.000.000 + (10M x 12% x 3/12) + (12M + 30M – 25M) = 22.000 MC30 C (124.000 + 366.000 – 180.000.000 + 50.000) + 136.000 + 7.000 = 1.000 + (800.000.000 = 2.000 + 450.150. 21 D MC2 A MC12 D MC 22 C MC3 A MC13 C MC 23 C MC4 A MC14 D MC 24 A MC5 A MC15 B MC 25 B MC6 C MC16 C MC7 D MC17 D MC8 D MC18 A MC9 C MC19 C MC10 C MC20 C MC26 A (200.526.525.000 – 8.000 + 450.000 MC35 A 450.317.000 + (2.876.500 = 1.000 = 2.125.000 + 12.000 = 3.000 + 80.000 + 900.160.000-50.000 – 12.070.000 + (2.000 = 4.980.000 MC47 B (550.000 + (2.000 = 1.000 + 92.000 + 830.934.000 MC32 B (1.000 + (250.801.000 = 324.000 MC46 B 150.000 + 136. A 2.000 .000 MC31 B 13.000 = 3.000 = 5.000 – 500.000/5) + 28.000 + 50.000 – 80.000 = 1.000 MC51 C 525.000 = 866.526.014.000 – 4.175.000 MC37 C 980.000 + 3.000 = 4.000 = 1.000 – 90.000 MC39 A (490. B 3.000.200.000 + (750.000 + 25.000 MC49 B 175.722.000 + 120.000 – 475.000) + 90.000 – 30.000 – 30. B 9.185.650.000 + 1.000 + 250.000 MC34 A 360.000 MC44 B (1.000 – 250. C 7.000) + 2.000 – 11.000 MC43 C 13. A MULTIPLE CHOICE QUESTIONS MC1 D MC11 B MC.180.000.360.000 x 2.000 – 200.000) = 2.000 = 630.000) – 1.600.000 + 50.000 +50.Chapter 3 – The Statement of Financial Position and Notes to the Financial Statements 3-11.000 + 480.880.000 + 90.000 + 13.000) + 1.000) + (1.000 – 200.000 + 110. 1.000 – 1.000 + 1.000 + 96.000) + 800.000 = 800.000 – 9.756.000 + 100. 1.468.855.000) + 136.000 – 6.000 + 15.000 + 248.000) + (380.350.000=3.000 X 12% X 7/12) + 6.000 17 .000+100.000 + 228.000 + 750.675.350.095.000 – 500.000 + 820.000 + (654.000 = 1.000 = 2.500 MC48 C 8.000 + 153.000 = 3. A 4.000) + 120.