Current Liabilities_assignment_with Answers_for Posting.docx

Current Liabilities Assignment 1. Roger has the following liabilities as of December 31, 20x1: Trade accounts payable, net of debit balance in supplier’s account of Php 10,000, net of unreleased checks of Php 8,000, and net of postdated checks of Php 4,000 Credit balance in customers’ accounts Financial liability designated as FVPL Bonds payable maturing in 10 equal annual installments of 200,000 12%, 5-year note payable issued on October 1, 20x1 Deferred tax liability Unearned rent Contingent liability Reserve for contingencies

600,000 4,000 100,000 2,000,000 200,000 10,000 8,000 20,000 50,000

How much is the total current liabilities? Solution: a. Trade accounts payable gross of debit balance, unreleased check, and postdated check (600,000 + 10,000 + 8,000 + 4,000). b. Advances from customers (Credit balance in customers’ accounts) c. Financial liability designated at FVPL d. Current portion of bonds payable e. Interest payable on note payable (P200,000 x 12% x 3/12) g. Unearned rent Total current liabilities

P622,000 4,000 100,000 200,000 6,000 8,000 P940,000

2. Roger’s account payable on December 31, 20x1 has a balance of Php 1,300,000. Additional information follows: a. Goods shipped FOB shipping point from a vendor to Roger on December 29, 20x1 amounting to Php 20,000 was recorded and included in the year-end physical count as “goods in transit”. b. Goods shipped FOB destination from a vendor to Roger on December 30, 20x1 amounting to PHp 40,000 was recorded and included in the year-end physical count as “goods in transit.” c. On December 31, 20x1, Roger recorded a Php 60,000 check drawn as payment to a supplier. The check is dated January 7, 20x2. Compute for the adjusted accounts payable on December 31, 20x1. Solution: Unadjusted balance

1,300,000

(a)

-

(b)

(40,000)

(c)

60,000

Adjusted accounts payable

1,320,000

3. Roger’s liabilities at December 31, 2005, were as follows: Accounts payable and accrued interest 12% note payable issued November 1, 2004 maturing July 1,2006 10% debentures payable next annual principal installment of Php 500,000 due February 1, 2006

1,000,000 2,000,000 7,000,000

On March 1, 2006, Roger consummated a non-cancelable agreement with the lender to refinance the 12% note payable on a long-term basis, on readily determinable terms that have not yet been implemented. Roger’s December 31, 2005 financial statements were issued on March 31, 2006. In its December 31, 2005 balance sheet, what amount should Roger report as current liabilities? Solution: Accounts payable and accrued interest 12% note payable issued Nov. 1, 2004 maturing July 1, 2006

1,000,000 2,000,000

10% debentures payable (current portion)

500,000

Total current liabilities

3,500,000

4. Roger sells service contracts that cover a 2-year period. The sale price of each contract is Php 2,000. Roger sold 1,000 contract evenly throughout 20x1. Roger’s past experience shows that of the total pesos spent for repairs on service contracts, 40% is incurred evenly during the first contract year and 60% evenly during the second contract year. a. how much are the current and noncurrent portions of the deferred revenue to be presented in Roger’s December 31, 20x1 statement of financial position? b. how much is the service revenue recognized in 20x2? Solutions: Percentage earned - 1st yr. Percentage earned - 2nd yr. First half (2M ÷ 2) Second half (2M÷2)

1M 1M

Earned portions

20x1

20x2

20x3

40%

60%

400,000

40% 600,000 400,000

600,000

400,000

1,000,000

600,000

60%

Requirement (a): Current and noncurrent portions – December 31, 20x1 Current portion of deferred revenue (earned portion in 20x2) Noncurrent portion of deferred revenue (earned portion in 20x3) Total deferred revenue (P1M less earned portion in 20x1 of P200,000) Requirement (b): Service revenue – 20x2 Service revenue in 20x2 (600,000 + 400,000)

P1,000,000 600,000 P1,600,000 P1,000,000

Total

2,000,000

5. Roger must determine the December 31, 20x1, year-end accruals for advertising and rent expense. A Php 50,000 advertising bill was received on January 7, 20x2, comprising Php 35,000 for advertisements in December 31, 20x1 issues of a newspaper and Php 15,000 for advertisements in January 20x2/ A store lease, effective October 16, 20x1, calls for fixced rent of Php 120,000 per month, payable one month from the effective date and monthly thereafter. In addition, rent equal to 5% of net sales over Php 6,000,000 per calendar year is payable on January 31 of the following year. Net sales for 20x1 were Php 9,000,000. How much are accrued liabilities in the December 31, 20x1 statement of financial position? Solution: Advertising expense - December Rent expense (120,000 x 1/2) Contingent rent [(9M - 6M) x 5%]

35,000 60,000 150,000

Accrued liabilities

245,000

6. Roger’s liabilities at December 31, 2008 were as follows: Accounts payable and accrued interest 2,000,000 5-year 10% notes payable – due December 31, 2011 5,000,000 Part of the loan agreement is for Roger to appropriate a fixed amount of its accumulated profits and losses annually until the amount of appropriation has equaled the face amount of the obligation. Non-compliance will render the note as payable on demand by the lender. As of December 31, 2008, Roger Corporation has yet to comply with the loan agreement. a. What amount of current liabilities should Roger report in its December 31, 2008 statement of financial position? b. Assume the lender agreed on December 31, 2008 to provide Roger a grace period of 12 months to rectify the breach and within which the lender will not demand payment. What amount of current liabilities should Roger report in its December 31, 2008 statement of financial position? Solution: (2M + 5M) = 7,000,000 Solution: 2,000,000 7. Roger offers three payment plans on its 12-month contracts. Information on the three plans and the number of children enrolled in each plan for September 31, 2005 through August 31, 2006 contract year follows: Plan Initial payment per child Monthly fees per child No. of children 1 500 0 15 2 200 30 12 3 50 9 Roger received all initial payments on September 1, 2005 and Php 3,240 of monthly fees during the period September 1 through December 31, 2005. Requirement: In its December 31, 2005 balance sheet, what amount should Roger report as deferred revenue? Solution: Plan #1 #2 #3

Initial payment per child 500 200 -

No. of children 15 12 9

Total 7,500 2,400 -

Multiply by: Unexpired portion

9,900 8/12

Unearned revenue

6,600

MIAW