Problem 1.

Hard Company provided the account balances on December 31, 2017:

Share Capital 5,000,000 SHE

Share Premium 500,000 SHE
Retained earnings 880,000 SHE
Serial Bonds Payable (500,000 due every July 1 of each year) 2,500,000 500 CL; 2M NCL
Employee income tax payable 20,000 CL
Notes Payable (if there is no terms, current liabilities) 100,000 CL
Accrued Expenses 30,000 CL
Accrued interest on note payable 10,000 CL
Income tax payable 60,000 CL
Allowance for doubtful accounts (50,000) CA
Advances from customers 100,000 CL
Accounts Receivable 500,000 CA
Accumulated Depreciation- building 1,600,000 NCA -
Accumulated Depreciation – machinery 1,300,000 NCA -
Financial Asset at amortized cost 1,500,000 NCA
Land 1,500,000 NCA
Machinery 2,000,000 NCA
Factory Supplies 50,000 CA
Notes Receivable (if silent as to terms, CA) 150,000 CA
Building 4,000,000 NCA
Cash 420,000 CA
Claim receivable (trade receivables) 20,000 CA
Finished Goods (inventory) 400,000 CA
Franchise 200,000 NCA
Goods in process (inventory) 600,000 CA
Prepaid Insurance 20,000 CA
Raw Materials (inventory) 200,000 CA
Financial assets at fair value 250,000 CA
Tools 40,000 NCA
Goodwill 100,000 NCA
Plant expansion fund 500,000 NCA
Accounts payable 300,000 CL

Compute for the ff:

1. Current Assets 2. Non-Current Assets 3. Current Liability 4. Non-current Liabilities 5. SHE
2,000,0000 6,380,000

Problem 2. Parker Company reported operating expenses as distribution and general or administrative.
The adjusted trial balance at the end of the current year included the following expense accounts:
Income from continuing operations 8,000,000 NI
Income from Investment in associate 300,000 ignored, part of Con.Op.
Gain from sale of equipment 100,000 ignored, part of Con.Op.
Accounting and legal fees 1,450,000 Admin Exp
Advertising 1,500,000 Distri Exp
Freight-out 750,000 Distri Exp
Interest 600,000 Finance Cost
Loss on sale of long-term investment 300,000 Other Expenses
Officers’ salaries 2,250,000 Admin Exp
Property taxes and insurance 300,000 Admin Exp
Office rent expense (half of the premises is occupied by sales dept) 1,800,000 50% AE; 50% DE
Sales Salaries and Commissions 1,400,000 DE
Income from discontinued operations 500,000 NI
Unrealized loss on equity investment – FVOCI 1,000,000 OCI
Unrealized gain on debt investment – FVOCI 1,200,000 OCI
Unrealized gain on futures contract designated as a cash flow hedge 400,000 OCI
Translation loss on foreign operation 200,000 OCI
Net remeasurement loss on defined benefit plan 600,000 OCI
Unrealized gain on financial asset – FVPL 800,000 ignored, part of Con.Op.
 Loss on credit risk of a financial liability at FVPL 300,000 OCI
Revaluation surplus during the year 2,500,000 OCI

1. What total amount should be included in distribution expense for the current year?
2. What amount of these costs should be reported as administrative expenses?
3. What amount should be reported as net income for the current year?
4. What net amount should be reported as OCI for the current year?
5. What amount should be reported as comprehensive income for the current year?

Problem 3. An entity provided the following increases (decreases) in the statement of financial position
accounts on December 31, 2017 and 2016:
Cash and cash equivalents 120,000
Available for sale securities PAS 39-OCI 300,000 Investing -
Accounts Receivable, net -
Inventory 80,000 Operating -
Long-term investment (100,000)
Plant assets 700,000
Accumulated depreciation -
Accounts payable (5,000) Operating -
Dividend payable 160,000
Short term bank debt 325,000 Financing +
Long-term debt 110,000
Share Capital, P10 par 100,000 Financing +
Share premium 120,000 Financing +
Retained earnings 290,000

 Net income for the current year was P790,000. Operating +

 Cash dividend of P500,000 was declared. 500,000 – 160,000 = 340,000; Financing -
 Building costing P600,000 and with carrying amount of P350,000 was sold for P350,000. 350,000;
Investing +
 Equipment costing 110,000 was acquired through issuance of long-term debt.
 A long-term investment was sold for P135,000. There were no other transactions affecting long-term
investment. 135,000 = Investing +; 135,000 – 100,000 = 35,000 gain Operating -
 The shares were issued for cash. 100,000 (SC) + 120,000 (SP) = 320,000 Financing +
Depreciation Expense:
Depreciation Expense ? 250,000 (workback) Opearating +
Sale of Building (AD) (250,000)
AD, balance 0

Acquisition of Equipment:
Plant asset,balance 700,000
Building sold 600,000
Equipment acquired (110,000)
Cash transaction 1,190,000 Investing -

1. What is the net cash provided by operating activities? 920,000

2. What is the net cash used in investing activities? 1,005,000
3. What is the net cash provided by financing activities? 205,000

Problem 4. On October 1, 2017, Builder Company has a building with a cost of 4,000,000 and accumulated
depreciation of 3,100,000. The company commits to a plan to sell the building by February 1, 2018. On October
1, 2017, the building has an estimated selling price of 800,000, and it is estimated that selling costs associated
with the disposal of the building will be 120,000. On December 31, 2017, the estimated selling price of the
building has increased to 1,200,000, with estimated selling costs remaining at 120,000.

1. At the time of reclassification as held for sale, what amount should the noncurrent asset held for sale be
recognized? 900,000 (CA) vs 680,000 (FVLCD) = Lower 680,000 (FVLCD)

2. What amount of loss should Builder Company recognize at the time the building was reclassified as held for
sale? 680,000 – 900,000 = 120,000 impairment loss FVLCD < CA
3. As of December 31, 2017, what amount of gain on recovery should Builder Company recognize related to
the asset held for sale? 1,080,000 – 780,000 = 300,000 increased in FVLCD but accgd to PFRS 5, par 21, if
subsequently there is an increase in the FVLCD the entity shall recognize a gain but not in excess of any impairment loss previously
recognized. Therefore, answer is 220,000.

Problem 5. On December 31, 2017, Villa Company Classified as held for sale an equipment with carrying
amount of 5,000,000. On this date, the equipment is expected to be sold for 4,600,000. Disposal cost is expected
at 200,000. On December 31, 2018, the equipment had not been sold and management after considering its
options decided to place back the equipment into operations. On December 31, 2018, the entity estimated that
the equipment is expected to be sold at 4,300,000 with the disposal cost at 50,000. The carrying amount of the
equipment was 4,000,000 on December 31, 2018 if the noncurrent asset was not classified as held for sale.

1. What is the impairment loss for 2017? 4,400,000 (FVLCD) – 5,000,000 (CA) = 600,000
2. What is the measurement of the equipment on December 31, 2018? PFRS 5, par 27, provides that the entity shall
measure the non current asset that ceases to be classified as held for sale at the lower of (1) CA before the asset is classified as held
fo sale and (2) Recoverable amount (RA) at the date of the subsequent decision not to sell.
4,000,000 (CA) vs 4,250,000 (RA) = 4,000,000 lower

3. What is the loss on reclassification? 4,400,000 (CA of held for sale) – 4,000,000 = (400,000) loss on
reclassification.

Problem 6. Abba Company accounts for noncurrent assets using the revaluation model. On June 30, 2017, the
entity classified a land as held for sale. At that date, the carrying amount was 2,900,000 and the balance of the
revaluation surplus was 200,000. On June 30, 2017, the fair value was estimated at 3,300,000 and the cost of
disposal at 200,000. On December 31, 2017, the fair value was estimated at 3,250,000 and the cost of disposal
at 250,000.

1. What is the adjusted carrying amount of the land on December 31, 2017? PFRS 5, par 18, However, at subsequent
year-end, the revalued asset classified as held for sale shall be measured at the lower of CA and FVLCD.
Revalued amount of NCA HFS (3,100,000) vs FVLCD (3,000,000) = LOWER is FVLCD 3,000,000.

2. What total amount should be reported as impairment loss for 2017? PFRS 5, par 18, Any cost of disposal at
classification date should be recognized as impairment loss for the period an deducted from the asset held for sale.

Problem 7.Grum Company, a publicly owned entity, is subject to the requirements of segment operating. In
the income statement for the year ended December 31, 2015, the entity reported revenue of P80,000,000,
including intersegment sales of P10,000,000, expenses of P47,000,000. Expenses excluded payroll costs of
P15,000,000.
The combined identifiable assets of all operating segments on December 31, 2015 totaled 40,000,000.
1. In the financial statements, the entity should disclose major customer data if sales to any single customer
amount to at least? 7,000,000, A major customer is defined as a single external customers providing revenue which amounts
to 10% or more of an entity’s external revenue.
2. External revenue of reportable operating segments must be what amount? 52,500,000, Over-all size test 75%
threshold, the total external revenue of all REPORTABLE segments should at least 75% of the total external revenue of the
entity’s operating segments, in case less than 75%, additional operating segments shall be identified as reportable segments even if
they do not meet the quantitative threshold of 75%.

Problem 8. Hippo Company is a diversified entity with nationwide interest in commercial real estate
development, banking, mining and food distribution. The food distribution division was deemed to be
inconsistent with the long-term direction of the entity.
On October 1, 2015 the board of directors voted to approve the disposal of this division. The sale is
expected to occur in August 2016.
The food distribution had revenue of P35,000,000 and expenses of P27,000,000 for the period January
1 to September 30, and revenue of P15,000,000 and expenses of P10,000,000 for the period October 1 to
December 31. The carrying amount of the division’s net assets on December 31,2015 was P56,000,000 and the
fair value less cost of disposal was P58,000,000.
The sale contract requires Hippo to terminate certain employees incurring an expected termination
cost of P4,000,000 to be paid by December 15,2016. The income tax rate is 30%.
1. What amount should be reported as income from discontinued operation for 2015? 6,300,000. PFRS 5, par
34, provides that if a disposal group is classified as held for sale in the current year, the results of the disposal group for prior period
shall be re-presented as relating to discontinued operation in the comparative figures for the current year’s income statement.

Problem 9. Correy Company and its divisions are engaged solely in manufacturing operations. The following
data pertain to the industries in which operations were conducted for the current year:
Industry Revenue Profit (Loss) Assets
A 10,000,000 (1,750,000) 20,000,000
B 8,000,000 1,400,000 17,500,000
C 6,000,000 (1,200,000) 12,500,000
D 3,000,000 550,000 7,500,000
E 4,250,000 675,000 7,000,000
F 1,500,000 225,000 3,000,000

1. How many reportable segments does Correy have? 5 reportable operating segments
An operating segment is considered as REPORTABLE if it meets any of the ff quantitative threshold:
1. The segment revenue (internal and external) is 10% or more of the combined segment revenue of all operating
segments.
2. The absolute amount profit or loss whichever is higher is 10% or more
3. The assets of the segment is 10% or more of the combined assets of all operating segments.
Problem 10. On January 1, 2013, Brazilia Company purchased for P4,800,000 a machine with a useful life of
10 years and a residual value of P200,000. The machine was depreciated by the double declining balance. The
entity changed to the straight line method on January 1, 2015. The residual value did not change.

1. What is the accumulated depreciation on December 31, 2015?

2. What is the carrying amount of machine for the year ended December 31, 2017?
3. What is the depreciation expense for 2016?
Answers:
1. December 31, 2013 4,800,000 x 20% = 960,000
December 31, 2014 (4,800,000 – 960,000) x 20% = 768,000
December 31, 2015 (4,800,000 – 960,000 – 768,000 -200,000) / 8 yrs = 359,000
Accumulated Dep for 2015 = 960,000+768,000+359,000 = 2,087,000
2. CA on Dec 31, 2017: 4,800,000 – 2,087,000 – 359,000 – 359,000 = 1,995,000
3. 359,000

Problem 11. X Company experienced a P500,000 decline in the market value of inventory at the end of the
first quarter. The entity had expected this decline will reverse in the second quarter, and in fact, the second
quarter recovery exceeded the previous decline by P100,000.

1. What amount of gain or loss should be reported in the interim statements for the first quarter? (500,000)
Impairment loss

2. What amount of gain or loss should be reported in the interim statements for the second quarter? 500,000

PFRS 5, par 21, if subsequently there is an increase in the FVLCD the entity shall recognize a gain but not in excess of any
impairment loss previously recognized.