Test Bank for Financial Accounting & Reporting | Comprehensive Exam Prep

FINANCIAL ACCOUNTING AND REPORTING TEST BANK WITH
VERIFIED SOLUTION
8152017 – 1

PROBLEM 1 – STATEMENT OF FINANCIAL POSITION

The following trial balance of an entity on December 31, 2017 has been adjusted except for income tax
expense.
Cash 6,000,000
Accounts receivable 14,000,000
Inventory 10,000,000
Property, plant and equipment 25,000,000
Accounts payable 9,000,000
Income tax payable 6,000,000
Preference share capital 3,000,000
Ordinary share capital 15,000,000
Share premium 4,000,000
Retained earnings – January 1 9,000,000
Net sales and other revenue 80,000,000
Cost of goods sold 48,000,000
Expenses 12,000,000
Income tax expense 11,000,000 __________
126,000,000 126,000,000
During the year, estimated tax payments of P5,000,000 were charged to income tax expense. The tax
rate is 30% on all types of revenue. Inventory and accounts payable included goods purchased in
transit, FOB destination, costing P500,000, and unsold goods held on consignment at year-end, costing
P300,000. The perpetual system is used. The preference share capital is redeemable mandatorily on
December 31, 2018.

1. What amount should be reported as current assets on December 31, 2017?
a. 29,200,000
b. 29,700,000
c. 29,500,000
d. 30,000,000

2. What amount should be reported as current liabilities on December 31, 2017?
a. 14,200,000
b. 17,200,000
c. 12,200,000
d. 9,200,000

3. What is the net income for 2017?
a. 20,000,000
b. 14,000,000
c. 23,000,000
d. 9,000,000

4. What amount should be reported as total shareholders’ equity on December 31, 2017?
a. 40,000,000
b. 37,000,000
c. 45,000,000
d. 42,000,000

, Page 2


SOLUTION - PROBLEM 1

Question 1 Answer A

Cash 6,000,000
Accounts receivable 14,000,000
Inventory (10,000,000 - 500,000 - 300,000) 9,200,000
Total current assets 29,200,000


Question 2 Answer C

Net sales and other revenue 80,000,000
Cost of goods sold ( 48,000,000)
Expenses ( 12,000,000)
Income before tax 20,000,000
Tax expense (30% x 20,000,000) ( 6,000,000)
Net income 14,000,000

Tax expense 6,000,000
Payment during year (5,000,000)
Income tax payable 1,000,000

Accounts payable 8,200,000
Income tax payable 1,000,000
Redeemable preference 3,000,000
Total current liabilities 12,200,000

Accounts payable per book 9,000,000
Goods in transit FOB destination ( 500,000)
Goods held on consignment ( 300,000)
Adjusted accounts payable 8,200,000


Question 3 Answer B

Net income 14,000,000


Question 4 Answer D

Ordinary share capital 15,000,000
Share premium 4,000,000
Retained earnings 23,000,000
Total shareholders’ equity 42,000,000

Retained earnings – January 1 9,000,000
Net income 14,000,000
Total retained earnings 23,000,000

, Page 3

PROBLEM 2 - STATEMENT OF FINNACIAL POSITION

3. On December 31, 2017, an entity showed the following current assets:
Cash 500,000
Accounts receivable 2,500,000
Inventory 2,000,000
Prepaid expenses 100,000
Total current assets 5,100,000
Cash on hand including customer postdated check of P20,000 and employee
IOU of P10,000 130,000
Cash in bank per bank statement (outstanding checks on December 31,
2017, P70,000) 370,000
Total cash 500,000
Customers’ debit balances, net of customer deposit of P50,000 1,900,000
Allowance for doubtful accounts ( 150,000)
Sale price of goods invoiced to customers at 150% of cost on December 29,
2017 but delivered on January 5, 2018 and excluded from reported
inventory 750,000
Total accounts receivable 2,500,000

1. What is the adjusted cash balance?
a. 500,000
b. 470,000
c. 430,000
d. 400,000

2. What is the net realizable value of accounts receivable?
.

a. 1,970,000
b. 1,820,000
c. 1,800,000
d. 1,950,000

3. What is the adjusted inventory?
a. 2,000,000
b. 2,375,000
c. 2,500,000
d. 2,750,000

4. What total amount of current assets should be reported?
a. 4,900,000
b. 4,830,000
c. 4,780,000
d. 4,630,000