STATEMENT OF FINANCIAL POSITION

1. The following data are obtained from the trial balance of AIR Inc. as of December 31,2014:

(1) Cash and cash equivalents (net of bank overdraft of P100,000) P 900,000
(2) Financial Assets at fair through profit or loss (inclusive of AIR Inc's Stock with cost of P500,000) 1,500,000
(3) Accounts receivable (net of customer's account with credit balance of P200,000) 300,000
(4) Inventories (inclusive of items realizable within 15 months amounting to P100,000) (exception ang Inventories & AR) 500,000
(5) Biological assets 200,000
(6) Investment property 400,000
(7) Prepaid assets 200,000
Total Current Assets 4,000,000

(8) Income tax payable (inclusive of deferred tax liability amounting to P300,000) 1,300,000
(9) Estimated premium liability 200,000
(10) Estimated warranty liability 400,000
(11) Stock dividends payable (To be paid on January 10, 2015) 500,000
(12) Bonds payable 700,000
(13) Loans payable due on January 1, 2016 300,000
(14) Accounts payable (net of supplier's account with debit balance of P300,000) 200,000
Total Current Liabilities 3,600,000

What is the correct amount of working capital of AIR Inc. as of December 31,2014?
a. P1,100,000 b. P800,000 c. P700,000 d. P900,000

SOLUTION:
Current Assets 4,000,000
Add: Bank overdraft 100,000 (1) ibinalik sa cash kasi ito ay CL
Customer's credit balance 200,000 (3) ibinalik sa AR kasi hindi dapat imiminus
Supplier's debit balance 300,000 (14) company overpaid = AR
Less: Biological assets (200,000) (5) NCA - disregard
Investment property (400,000) (6) NCA - disregard
Treasury shares, at cost (500,000) (2) reacquisition of shares = Treasury Shares - hindi kasama sa Assets or Liabilities
Total Current Assets 3,500,000

Current Liabilities 3,600,000

Add: Bank overdraft 100,000 (1) CL
Customer's credit balance 200,000 (3) utang ng AIR INC. kasi lumabis ang bayad ni customer
Supplier's debit balance 300,000 (14) add-back
Less: Deferred tax liability (300,000) (8) NCL - disregard
Stock dividends payable (500,000) (11) EQUITY - disregard
Bonds payable (700,000) (12) NCL - disregard
Loans payable due 2016 (300,000) (13) NCL - disregard
Total Current Liabilities 2,400,000

Working Capital (TCA - TCL) 1,100,000

NOTE: Bank overdraft = a Current Liability; NOT netted against Cash

Customer's credit balance = a Current Liability; NOT netted against A/R
Supplier's debit balance = a Current Asset; NOT netted against A/P
AIR Inc.'s stock = treasury shares

2. The following data are provided by the accounting department of SUN Inc.:

January 1, 2014 December 31, 2014

Current Assets P2,000,000 ?
Current Liabilities 1,000,000 ?
Noncurrent Liabilities ? ?
Noncurrent assets 3,000,000 ?

Additional notes are provided:

a. The debt ratio at January 1, 2014 is 60%.
b. The current ratio at the beginning of the year remains at the end of the year.
c. The noncurrent liabilities decrease by P500,000 during the year.
d. The noncurrent assets increase to P4,000,000.
e. The current assets increase by P1,000,000.

What is the increase/(decrease) in capital during the year?

a. P2,000,000 b. P1,000,000 c. 2,500,000 d. P1,500,000

SOLUTION:
ASSETS = LIABILITIES + EQUITY
CA NCA CL NCL
1/1/2014 2,000,000 3,000,000 = 1,000,000 2,000,000 (a) 2,000,000 (b)
changes 1,000,000 (500,000) 2,000,000 (e)
12/31/2014 3,000,000 4,000,000 1,500,000 (c) 1,500,000 4,000,000 (d)

Reference:
(a) Debt ratio = Total Liabilities/Total Assets = 60%
TL = 1M + X
TA = 5M
60% = (1M + X)/ 5M
3M = 1M + X
X = 2M

(b) Squeeze: A-L = E

(c) Current ratio = Current Assets/Current Liabilities

CR @ beginning (2M/1M) = 2
CR @ end (3M/X) = 2
X = 1.5M

(d) Squeeze: A-L = E

(e) Squeeze

3. The following accounts/items are obtained from the trial balance of WIND Inc. as of December 31,2014:

Bonds payable due on December 31,2016 P2,000,000

Unamortized bond issue cost 200,000
Unamortized bond premium 300,000
Deferred tax liability (P200,000 will reverse in 2015 and P300,000 in 2016) 500,000 disregard the reversal dates in classifying current or oncurrent
Loans payable (P100,000 payable every quarter) 800,000
Contingent liability - reasonably possible (due on January 15, 2015) 300,000 reasonably possible - 15 days after reporting date = CL
Share premium 400,000 Equity account
Notes payable due on December 31,2015 900,000 CL
Ordinary share capita 500,000 Equity account
Subscribed share capital 300,000 Equity account
Treasury shares at cost 100,000 Equity account
Retained earnings 400,000 Equity account

What is the total noncurrent liabilities to be presented by WIND Inc. as of December 31,2014?
a. 2,800,000 b. 3,900,000 c. P3,000,000 d. P3,300,000

SOLUTION: Review of Intacc2

Bonds payable due on December 31,2016 2,000,000
Less: Unamortized bond issue cost (200,000) related sa bonds
Unamortized bond premium 300,000 add sa bonds payable (minus pag discount)
Deferred tax liability 500,000 NCL buo
Loans payable (P100,000 payable every quarter) 800,000
Less: (P100,000 x 4qtrs) - Current liability (400,000) current mula sa loans payable
Total Noncurrent Liabilities 3,000,000

4. The following accounts/items are obtained from the trial balance of EARTH Inc. as of December 31,2014:

Property, plant and equipment (inclusive of land classified as held for sale amounting to P500,000 P 3,500,000 Held for sale - CA
Preference share redemption fund 1,500,000 Redemption fund - NCA
Cash and cash equivalents (inclusive of cash surrender value of insurance amounting to P300,000) 1,300,000 Cash surrender value - NCA
Bond sinking fund (the related bonds payable is due on December 31,2015) 4,000,000 CA - but if the problem is silent = NCA
Plant expansion fund 5,000,000 reserved for plant expansion - NCA
Deferred tax asset (200,000 will reverse in 2015) 500,000 always NCA
Trading securities at fair value 400,000 FVPL (active in current operations) - CA
Investment in bonds at amortized cost 3,800,000 mirror of bonds payable; if the problem is silent - NCA
Investment in equity securities classified as fair value through OCI 1,300,000 available for sale securities before - nasa market lang siya pero hindi pinagbebenta agad-agad (unsure) - NCA
 Investment in PKI Co. at cost (inclusive of Earth's OS with cost at P500,000) 2,000,000 nagreacquire si Earth ng investment - Treasury shares (deduct) = NCA
Accounts receivable realizable within 18 months 600,000 exception ang AR sa 1 year rule; normal operating cycle - CA
Investment in associate 3,000,000 hindi binili for trading - NCA
Prepaid assets 200,000 CA
Car for sale in the ordinary course of business 4,000,000 CA
Advances to employees 100,000 CA
Advances to affiliates 900,000 establishing credit standing to sister companies (baka mawala ang relationship kaya hindi agad sinisingil) - NCA
Investment in subsidiary 300,000 NCA
Investment in joint venture 200,000 NCA

What is the total noncurrent assets to be presented by EARTH Inc. as of December 31, 2014?
a. P26,500,000 b. P22,300,000 c. P27,200,000 d. P25,400,000

SOLUTION: Review of Intacc1

PPE less Land Held for Sale 3,000,000
Preference share redemption fund 1,500,000
Cash surrender value 300,000
Plant expansion fund 5,000,000
Deffered tax asset 500,000
Bonds at amortized cost 3,800,000
Investment FVOCI 1,300,000
Investment in PKI less Earth's OS 1,500,000
Investment in associate 3,000,000
Investment property 1,000,000
Intangible assets 2,000,000
Biological assets 700,000
Investment in joint venture 400,000
Advances to affiliates 900,000
Investment in subsidiary 300,000
Investment in joint venture 200,000
Total Noncurrent Assets 25,400,000

5. The following accounts/items are provided by the accounting department of STAR Inc. as of December 31, 2014:

Ordinary share at par 2,000,000 2,000,000

NCL Unamortized bond premium 500,000 kasama ng related liability
Donated capital 300,000 300,000 Government grant etc.; recorded in Share Premium
Conversion option 200,000 200,000
NCL Unamortized bond issue cost 100,000
NCL Derivatives 400,000
Preference share at par 1,000,000 1,000,000
Treasury shares at cost 500,000 (500,000) binili ni cimpany sarili niyang shares
Share options/warrants 200,000 200,000 kasama rin sa Share Premium
Additional paid in capital in excess of par 600,000 600,000
E Share dividends payable 100,000
Subscribed ordinary share at par 800,000 800,000 may plano pa lang bilhin ang shares; hindi pa fully paid
Subscribed preference share at par 300,000 300,000 (same)
Total Retained Earnings - Adjusted after closing income summary 3,000,000 3,000,000
CA Subscription receivable - Ordinary Share - due on December 31, 2015 200,000 to be collected within a year
Subscription receivable - Preference Share - due on December 31, 2016 100,000 (100,000) to be collected more than 1 year = deduct to Equity
Cumulative realized gain on sale of financial asset at fair value through OCI 200,000 200,000 realized
Cumulative unrealized loss arising from derivatives classified as cash flow hedge 500,000 (500,000) unrealized
Balance of revaluation surplus 400,000 400,000
Actuarial gain from defined benefit plan 300,000 300,000
Transaction loss from foreign currency 100,000 (100,000)
8,100,000
What is the total stockholder's equity to be presented by STAR Inc. as of December 31, 2014?
a. P7,500,000 b. P8,100,000 c. P8,600,000 d. P8,300,000

NOTE: Subscription receivable to be collected within 1 year = CURRENT ASSET

Subscription receivable to be collected BEYOND 1 year = deducted from SHE

6. The following liabilities are obtained from the trial balance of SPACE Inc. as of December 31, 2014:

CL Notes payable (due on June 30, 2015) 1,000,000

NCL Loans payable (due on December 31, 2016) 2,000,000
NCL Bonds payable (due on March 31, 2015) 3,000,000

The following additional notes are provided:

a. The financial statements are approved by the Board of Directors on April 15, 2015.
b. The notes payable is refinanced by SPACE Inc. on February 28, 2015 by additional 12 months. (Sa future pa mangyayari. - disregarded)
c. The loans payable contains acceleration clause provision which means that non-payment of any interest will make the principal due and demandable. SPACE failed to pay the (Hindi na-apply yung acceleration clause. Binigyan ng grace period. Back to NCL.)
required interest in 2014. The creditor granted grace period to SPACE on December 31, 2014.
d. SPACE Inc. has the discretion to refinance or roll-over the bonds payable under existing loan facility for a period of at least 12 months. (Due date was extended. 12 + 3 months = more than 1 year.)

What is the total current liabilities to be presented by SPACE Inc. as of December 31, 2014?
a. P4,000,000 b. P5,000,000 c. P3,000,000 d. P1,000,000

NOTE: The refinancing occurred on Feb. 28, 2015 - after end of the reporting period. Thus, Note Payable = Current Liability.