Net cash flows provided by operating activities:

Receipts:
Dividends received 500,000
Collections from customers 9,000,000
Interest received 200,000 9,700,000
Payments:
Cash paid for equity investments held for trading 1,000,000
Payments to suppliers and employees 6,000,000
Payment of income taxes 300,000
Interest paid 400,000 (7,700,000) 2,000,000
Net cash flows used in investing activities:
Proceeds from sale of long term investments 2,000,000
Cash paid for equity investments @ FVOCI (3,500,000) (1,500,000)
Net cash flows provided by financing activities:
Proceeds from issuance of share capital 4,000,000
Proceeds from long term debt 2,500,000 6,500,000
Net increase in cash 7,000,000

Answers:
D
C
C

Problem 2

Net income 5,000,000

Amortization of patent 45,000
Depreciation of PPE 1,650,000
Bond discount amortization 65,000
Unrealized loss on financial assets held for trading 100,000
Net cash provided by operating activities 6,860,000

Answer:
D

Problem 3

Net income 7,500,000

Share in net income of investee under equity method (550,000)
Unearned interest income (50,000)
Bond premium amortization (140,000)
Deferred tax liability 180,000
Net cash provided by operating activities 6,940,000

Answer:
C

Problem 4

Net cash flows provided by operating activities:

Net income 8,000,000
Increase in accounts receivable (2,000,000)
Decrease in inventory 3,500,000
Increase in accounts and notes payables 4,000,000
Decrease in income tax payable (4,500,000)
Depreciation and amortization 1,500,000
Gain on sale of equipment (500,000) 10,000,000
Net cash flows used in investing activities:
Purchase of equipment (7,000,000)
Proceeds from sale thereof 2,000,000 (5,000,000)
Net cash flows used in financing activities:
Decrease in long term debt (5,000,000)
Treasury shares (1,000,000)
Payment of cash dividends (2,500,000)
Issuance of share capital 4,000,000 (4,500,000)
Net increase in cash 500,000

Answers:
A
B
D

Problem 5

Payment of bonds payable (4,000,000)

Payment of cash dividends (2,000,000)
Sale of treasury shares 1,500,000
Cash used in financing activities (4,500,000)

Answer:
A

Problem 6

Acquisition of equity investments (2,000,000)

Sale of investments 1,500,000
Acquisition of certificate of deposit (5,000,000)
Cash used in financing activities (5,500,000)

Answer:
A
 Problem 1

Cash in Bank ₱ 4,000,000

Accounts receivable (net) (8M-3M-500T) 4,500,000
Notes Receivable, net**--assumed current 2,000,000
Inventory* 6,900,000
Prepaid Expenses 1,000,000
Equipment classified as HFS*** 2,000,000
Total Current Assets ₱ 20,400,000

Answer: A

* Billed Price 3,000,000

BPR 125%
Cost of Inventory 2,400,000
Inventory unadjusted 4,500,000
Adjusted Inventory 6,900,000

** 500,000 deducted from notes receivable, to be

discussed in receivable financing (treated as a condtional sale)
*** to be discussed in NCA held for sale and discontinued operations
**** 2,500,000 is a non-current asset; total assets is 22,900,000.

Problem 2

Accounts Payable ₱ 2,000,000

Accrued Expenses 800,000
Notes Payable due Mar 1, 2022 1,500,000
***** Income Tax Payable 1,100,000
Cash Dividends Payable 600,000
Total Current Liabilities ₱ 6,000,000

***** 500,000 is non-current liability (to be discussed in deferred income tax)

^ Share Dividends Distributable is not a current liability but should be reported as an
addition to ordinary share capital in the shareholders' equity section.
^^ 2,800,000 bonds payable is a non-current liability; total liabilities is 9,300,000.

Answer:
A

Problem 3

Cash (5000000 - 1000000)* ₱ 4,000,000

Accounts Receivable 2,000,000
Inventory (net), 200,000 goods received on consignment deducted. 600,000
Equity investments at FVPL 3,000,000
Prepaid expense (50,000 deducted)*** 100,000
Total Current Assets ₱ 9,700,000

* Cash that is restricted for a fund should parallel the classification of a related liability
(i.e., the 1000000 sinking fund is related to the settlement of bonds payable, which is a non-current liability)
** Equity investments at FVOCI is a non-current asset.
*** 50000 deposit (advances to suppliers) treated as a noncurrent asset

Answer:
C

Problem 4

Cash ₱ 400,000
Accounts Receivable 700,000
Inventory 1,200,000
Prepaid Expenses 200,000
Land held for sale 2,000,000
Total Current Assets ₱ 4,500,000
Property, Plant and Equipment, net 1,900,000
Total Assets ₱ 6,400,000

Accounts Payable (600000 + 700000) ₱ 1,300,000

Share Capital 3,000,000
Share Premium 500,000
Retained Earnings 1,600,000
Total Liabilities and Shareholders' Equity ₱ 6,400,000

Answers:
1A
2B

Problem 5
Answer: B.
The 2M note is to be classified as a noncurrent liability.

Problem 6
Provision for damages ₱ 3,000,000
Uncollectible AR (4 m x 90%) 3,600,000
Adjustments ₱ 6,600,000

Loss on value of investments amounting to P3M should be dislcosed.

Answer:
A
 Problem 1

Net Sales ₱ 9,500,000

Cost of Goods Sold 4,000,000
Gross Income ₱ 5,500,000
Other income--gain on expropriation 500,000
Total Income ₱ 6,000,000
Expenses:
Selling expenses (1,000,000)
Administrative expenses (1,200,000)
Interest expense (700,000) (2,900,000)
Income before income tax ₱ 3,100,000
Income tax epense (800,000)
Income from continuing operations ₱ 2,300,000
Income from discontinuing operations 600,000
Net Income ₱ 2,900,000
* Net Other Comprehensive Income
(see below) 2,600,000
Total Comprehensive Income ₱ 5,500,000

* OCI to be reclassified to P&L:

Foreign translation gain 100,000
Unrealized loss on forward contracts
designated as a cash flow hedge (400,000)
Unrealized loss on debt instrument
meaaured @ FVOCI (200,000) (500,000)
OCI to be reclassified to retained earnings:
Revaluation Surplus
(to be discussed in detail in PPE) 2,500,000
Unrealized gain on equity instrument
measured @ FVOCI 900,000
Actuarial loss on defined benefit plan due to
actuarial assumptions (300,000) 3,100,000
Net Comprehensive Income 2,600,000

Answers:
1A
2D
3A

Problem 2

Unadjusted net income ₱ 7,400,000

Adjustments:
Liquidating dividend received from an associate (400,000)
Unrealized loss in equity investment @ FVOCI 550,000
PY error in underdepreciation 750,000
Loss of credit risk of FL at FVPL (500,000)
Adjusted net income ₱ 7,800,000

Notes: equity in earnings of an associate, gain on retirement on bonds payable and loss from fire
are properly included in net income, while the debit adjustment for PY error is treated as a deduction from RE.
(the correct comprehensive income is 6750000.)

Answer:
B

Problem 3

Acquisition Cost ₱ 7,200,000

Accumulated Depreciation for 2019 and 2020
(7200000/8 x 2) (1,800,000)
Carrying Amount, December 31, 2020 ₱ 5,400,000

Caarying Amount, Dec 31, 2020 ₱ 5,400,000

Residual value (600,000)
Depreciable Amount ₱ 4,800,000

Accumulated Depreciation, Jan 1, 2021 ₱ 1,800,000

Depreciation for 2021 (4800000/4) 1,200,000
Accumulated Depreciation, Dec 31, 2021 ₱ 3,000,000
6 years revised life minus 2 years expired

Answer:
C

Problem 4

FIFO ₱ 8,300,000
Weighted average (7,800,000)
Decrease in inventory, Dec 31, 2020 ₱ 500,000
After tax rate 70%
Debit to RE ₱ 350,000

Retained Earnings 350,000

Income Tax Payable 150,000
Inventory (500,000)
(note: inventories for 2018 and 2019 are ignored
because the effect is counterbalancing, these will be discussed in cash and accrual basis and correction of errors.)

Answer:
A

Problem 5

Straight line rate (1/10) 10%

Double declining rate (10% x 2) 20%
(to be discussed in PPE in detail) Year CV beg Depreciation Rate Depreciation CV end
2019 5,000,000 20% 1,000,000 4,000,000
Carrying amount, Jan 1, 2019 ₱ 5,000,000 2020 4,000,000 20% 800,000 3,200,000
Depreciation for 2019 (5000000 x 20%) (1,000,000) 2021 3,200,000 375,000 2,825,000
Depreciation for 2020 (4000000 x 20%) (800,000)
Depreciable amount, Jan 1, 2021 (DDB) ₱ 3,200,000
Depreciation for 2021 under SLM
(3200000 - 200000)/8 years (375,000)
Carrying Amount, Dec 31, 2021 ₱ 2,825,000

Answer:
A

Problem 6
Building Machinery Furniture
Cost, Jan 1, 2018 ₱ 15,000,000 ₱ 10,500,000 ₱ 3,500,000
Accumulated Depreciation (3 years each)
(15000000/15) x 3 (3,000,000)
(10500000/10) x 3 (3,150,000)
(3500000/7) x 3 (1,500,000)
Carrying Amount, Jan 1, 2021 ₱ 12,000,000 ₱ 7,350,000 ₱ 2,000,000

Depreciation for 2020 CV Revised UL (yr) Dep Exp

Building ₱ 12,000,000 10 ₱ 1,200,000
Machinery 7,350,000 7 1,050,000
Furniture 2,000,000 5 400,000
Total Depreciation for 2021 ₱ 2,650,000

Answer:
A

Problem 7

Patent, Jan 1, 2016 ₱ 3,000,000

Accumulated Amortization (3M/10 x 5) (1,500,000)
Carrying Amount, January 1, 2021 ₱ 1,500,000

Revised remaining life of patent 8 years

Years expired 5 years
Revised remaining life 3 years

Amortization of patent
(based on remaining life- 1.5M/3) ₱ 500,000
Depreciation of equipment for 2021
(4600000-200000)/10 years 440,000
Total charges against income in 2021 ₱ 940,000

Answer:
A
Answer: 24,000 shares Number of Issued Shares (P2,000,000 - P800,000) / P50 = 24,000 shares

Answer:
No. Of authorized shares (P2,000,000/P50) 40,000
Issued shares P2,000,000 - P800,000) / P50 -24,000
Subscribed Shares (P400,000/P50) -8,000
Shares still available for subscription 8,000 shares

Contributed Capital:
Ordinary Share Capital (P2,000,000 - P800,000) P1,200,000
Subscribed Ordinary Shares Capital 400,000
Share Premium - Ordinary 300,000
Total Contributed Capital P1,900,000

4. What is the total number of ordinary shares issued at December 31, 2021?
Answer: 100,000 shares
P2,000,000 / P20 = 100,000 shares

5. How many preference shares were issued during 2021?

Answer: 4,000 shares
(P1,000,000 - P600,000) / P100 = 4,000 shares

6. What is the average issue price per share of the preference issued in 2021?
Answer: P140 per share
Increase in Preference Share Capital (P1,000,000 - P600,000) P400,000
Increase in Share Premium - Preference 160,000
Total issue price of PS in 2021 P560,000
Divide by no. of shares issued in 2021 4,000
Average issue price per share P 140

7. How many ordinary shares were issued in 2021?

Answer: 10,000 shares
(P2,000,000 - P1,800,000) / P20 = 10,000 shares

8. What is the average issue price per share of the ordinary shares issued in 2021?
Answer: P60 per share
Increase in Ordinary Share Capital (P2,000,000 - P1,800,000) P200,000
Increase in Share Premium - Ordinary (P800,000 - P400,000) 400,000
Total issue price of OS in 2021 P600,000
Divide by no. of ordinary shares issued in 2021 10,000
Average issue price per ordinary share P 60

Ordinary Share Capital (1,000 x P18) P18,000

Preference Share Capital (2,000 x P14) 28,000
Total P46,000

9. What is the amount credited to Share Premium - Ordinary?

Answer: P7,609
Allocated amount (P45,000 x 18/46) P17,609
Total par Value ( 1,000 x P10) -10,000
Share Premium - Ordinary P 7,609

10. What is the amount credited to Share Premium - Preference?

Answer: P7,391
Allocated amount (P45,000 x 28/46) P27,391
Total par value (2,000 x P10) 20,000
Share Premium - Preference P 7,391

11. What is the par value of the shares?

Answer: P130
Par Value (P130,000 / 1,000) P130

12. How many shares were issued?

Answer: 1,000 shares
No. Of shares issued (P140,000/P140) 1,000

13. What is the amount credited to Share premium - Ordinary as a result of this
exchange?
Answer: P160,000
Fair market value of equipment P560,000
Total Par Value of Ordinary Shares issued (4,000 x P100) -400,000
Share Premium P160,000

Answer: P100,000
Total Subscription price (4,000 x P225) P900,000
Total Par Value (4,000 x P200) 800,000
Share Premium - Preference P100,000

15. What amount will appear on December 31, 2021 statement of financial position as
Ordinary Share Capital?
Answer: P900,000
Ordinary Share Capital (30,000 x P30) P900,000

16. How much did Coleco pay the corporation?

Answer: P610,000
Unpaid subscription (30,000 x P40) x 1/2 P600,000
Advertising cost 10,000
Total P610,000

17. How many shares did Daniel receive from the subscription?
Answer: 16,000 shares
30,000 - 14,000 = 16,000 shares

18. What is the total contributed capital for Marcelo Corp. at December 31, 2021?
Answer: P2,969,850
Ordinary Share Capital P1,260,000
Share Premium - Ordinary 1,082,750
Share Premium - Preference 92,100
Preference Share Capital 500,000
Subscribed Preference Share 140,000
Subscription Receivable -105,000
Total Contributed Capital P2,969,850

19. What is the total shareholders’ equity of Marcelo Corp. at December 31, 2021?
Answer: P3,161,800
Total Contributed Capital P2,969,850
Retained Earnings 191,950
Total Shareholders’ Equity P3,161,800

20. What was the average issue price of the preference shares?
Answer: P17 per share
Total Issue Price of Preference Shares (P2,550,000 + P340,000) P2,890,000
No. Of Issued Preference Shares (P2,550,000/P15) 170,000
Average issue price per share (P2,890,000/170,000) P17 per share

21. How many ordinary shares were issued?

Answer: 60,000 shares
No. Of Ordinary Shares Issued (P3,000,000/P50) 60,000 shares

22. What was the original issue price per share of the ordinary shares?
Answer: P63 per share
Original issue price per ordinary share (P3,000,000 + P3,300,000) / 100,000) P63

23. What is the total paid-in capital?

Answer: P7,120,000
Paid-in Capital:
12% Cumulative Preference Share Capital, P100 par P 820,000
Ordinary Share Capital, P30 par, 300,000 shares authorized, 100,000
shares issued and outstanding 3,000,000
Share Premium - Ordinary 3,300,000
Total Paid-in Capital P7,120,000

24. What is the total shareholders’ equity?

Answer: P6,620,000
Shareholders’ Equity:
Total Paid-in Capital P7,120,000
Retained Earnings (Deficit) -500,000
Total Shareholders’ Equity P6,620,00