Pre Finact

Assets Cash Trade accounts receivable (net of ₱20,000 credit balance in accounts) Held for trading securities Financial assets designated at FVPL Investment in equity securities at FVOCI Investment in bonds measured at amortized cost (due in 3 years) Prepaid assets Deferred tax asset (expected to reverse in 20x2) Investment in Associate Investment property Sinking fund Property, plant, and equipment Goodwill Totals

20,000 80,000 160,000 60,000 140,000 120,000 20,000 24,000 72,000 92,000 76,000 200,000 56,000 1,120,000

How much is the total current assets? Liabilities Bank overdraft Trade accounts payable (net of ₱20,000 debit balance in accounts) Notes payable (due in 20 semi-annual payments of ₱8,000) Interest payable Bonds payable (due on March 31, 20x2) Discount on bonds payable Dividends payable Share dividends payable Deferred tax liability (expected to reverse in 20x2) Income tax payable Contingent liability Reserve for contingencies Totals

20,000 80,000 160,000 60,000 140,000 (60,000) 20,000 24,000 72,000 88,000 200,000 56,000 860,000

How much is the total current liabilities? The ledger of COURIER MESSENGER Co. as of December 31, 20x1 includes the following: 10% Note payable 160,000 12% Note payable 240,000 14% Mortgage note payable 120,000 Interest payable Additional information:  COURIER Co.’s financial statements were authorized for issue on April 15, 20x2.  The 10% note payable is due on July 1, 20x2 and pays semi-annual interest every July 1 and December 31. On January 28, 20x2, COURIER Co. entered into a refinancing agreement with a bank to refinance the entire note by issuing a long-term obligation.  The 12% note payable is due on March 31, 20x2 and pays annual interest every March 31. On January 31, 20x2, COURIER Co. extended the maturity of the note to March 31, 20x3 under the existing loan agreement. The extension of maturity date is at the option of COURIER.  The 14% mortgage note is due on December 31, 20x9. Per agreement with the creditor, COURIER is to pay quarterly interests on the note, failure to do so will render the note payable on demand. COURIER failed to pay the 3rd and 4th quarterly interests on the note during 20x1.

How much is the total current liabilities? The ledger of SQUAMOUS SCALY Co. as of December 31, 20x1 includes the following: 15% Note payable 100,000 16% Bonds payable 200,000 18% Serial bonds payable 400,000 Interest payable Additional information:  SQUAMOUS Co.’s financial statements were authorized for issue on April 15, 20x2.  The 15% note payable was issued on January 1, 20x1 and is due on January 1, 20x5. The note pays annual interest every year-end. The agreement with the lender provides that SQUAMOUS Co. shall maintain an average current ratio of 2:1. If at any time the current ratio falls below the agreement, the note payable will become due on demand. As of the 3rd quarter in 20x1, SQUAMOUS’s average current ratio is 0.50:1. Immediately, SQUAMOUS informed the lender of the breach of the agreement. On December 31, 20x1, the lender gave SQUAMOUS a grace period ending on December 31, 20x2 to rectify the deficiency in the current ratio. SQUAMOUS promised the creditor to liquidate some of its long-term investments in 20x2 to increase its current ratio.  The 16% bonds are 10-year bonds issued on December 31, 1992. The bonds pay annual interest every year-end.  The 18% serial bonds are issued at face amount and are due in semi-annual installments of ₱40,000 every April 1 and September 30. Interests on the bonds are also due semi-annually. The last installment on the bonds is due on September 30, 20x7. How much is the total current liabilities? Below are the account balances prepared by the bookkeeper for REEDY SLENDER Company as of December 31, 20x1: Assets Liabilities Cash 60,000 Accounts payable 80,000 Accounts receivable, net 176,000 Notes payable 400,000 Inventory 160,000 Prepaid income tax 32,000 Prepaid assets 20,000 Investment in subsidiary 40,000 Land held for sale 112,000 Property, plant, and 200,000 equipment Totals 800,000 480,000 Additional information:  Cash consists of the following: Petty cash fund (unreplenished petty cash expenses, ₱6,000) 8,000 Cash in bank (40,000) Payroll fund 56,000 Tax fund 28,000 Cash to be contributed to a sinking fund set up for the retirement of bonds maturing on December 31, 20x3 8,000 Total Cash 60,000  Checks amounting to ₱122,000 were written to suppliers and recorded on December 30, 20x1, resulting to a bank overdraft of ₱40,000. The checks were mailed on January 5, 20x2.  Accounts receivable consists of the following: Accounts receivable 160,000 Allowance for uncollectibility ( 20,000) Credit balance in customers’ accounts ( 12,000)

Selling price of unsold goods sent on consignment to FRAIL, Inc. at 120% of cost and excluded from REEDY’s inventory Accounts receivable, net 

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48,000 176,000

The inventory includes cost of goods amounting to ₱40,000 that are expected to be sold beyond 12 months but within the ordinary course of business. Also, the inventory includes cost of consigned goods received on consignment from WEAK Co. amounting to ₱20,000. Prepaid income tax represents excess of payments for quarterly corporate income taxes during 20x1 over the actual annual corporate income tax as of December 31, 20x1. Prepaid assets includes a ₱8,000 security deposit on an operating lease which is expected to expire on March 31, 20x3. The security deposit will be received on lease expiration. The land qualified for classification as “asset held for sale” under PFRS 5 Non-current Assets Held for Sale and Discontinued Operations as of December 31, 20x1. Accounts payable is net of ₱24,000 debit balance in suppliers’ accounts. Accounts payable includes the cost of goods held on consignment from WEAK Co. which were included in inventory. The notes payable are dated July 1, 20x1 and are due on July 1, 20x4. The notes payable bears an annual interest rate of 10%. Interest is payable annually.

How much is the adjusted working capital? The ledger of NEOPHYTE BEGINNER Co. as of December 31, 20x1 includes the following: Assets Petty cash fund 28,000 Cash in bank – Banco De Oro 60,000 Cash in bank – Metrobank 20,000 Accounts receivable (including ₱60,000 pledged accounts) 140,000 Accounts receivable – assigned 100,000 Equity in assigned receivables 40,000 Notes receivable (including ₱80,000 notes receivable discounted) 180,000 Notes receivable discounted 80,000 Advances to subsidiary 128,000 Held for trading securities 80,000 Inventory 248,000 Deferred charges 72,000 Cash surrender value 24,000 Bond sinking fund 400,000 Total assets 1,600,000 Liabilities Accounts payable Estimated warranty liability Loans payable related to assigned receivables (due in 12 months) Accrued expenses Bonds payable (due on December 31, 20x2) Premium on bonds payable Total liabilities

160,000 56,000 60,000 52,000 400,000 32,000 760,000

Additional information:  Petty cash fund includes IOU’s from employees amounting to ₱8,000. The remaining balance of ₱20,000 represents bills and coins.

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Cash in bank – Banco de Oro represents the balance per bank statement. As of December 31, 20x1, deposits in transit amounted to ₱40,000 while outstanding checks amounted to ₱12,000. Included in the bank statement as of December 31, 20x1 is an NSF check amounting to ₱32,000. Cash in bank – Metrobank represents the balance per ledger. As of December 31, 20x1, deposits in transit amounted to ₱8,000 while outstanding checks amounted to ₱4,000. Accounts receivable (unassigned) includes uncollectible past due accounts of ₱16,000 which need to be writtenoff. Also included in accounts receivable (unassigned) is a ₱20,000 receivable from a customer which was given a special credit term. Under the special credit term, the customer shall pay the ₱20,000 receivable in equal quarterly installments of ₱2,500. The last payment is due on December 31, 20x3. The held for trading securities include the reacquisition cost of NEOPHYTE Co.’s shares amounting to ₱16,000. Inventory includes ₱120,000 goods in transit purchased FOB Destination but excludes ₱48,000 goods in transit purchased FOB Shipping point.

How much is the working capital? Reconstruction of financial statement Use the following information for the next three questions: The ledger of NAÏVE UNAFFECTEDLY SIMPLE Co. in 20x1 includes the following: Jan. 1, 20x1 Dec. 31, 20x1 Current assets 2,400,000 ? Noncurrent assets 8,000,000 ? Current liabilities 1,800,000 2,000,000 Noncurrent liabilities ? 6,000,000 Additional information:  NAÏVE’s working capital as of December 31, 20x1 is twice as much as the working capital as of January 1, 20x1.  Total equity as of January 1, 20x1 is ₱3,400,000. Profit for the year is ₱4,800,000 while dividends declared amounted to ₱2,000,000. There were no other changes in equity during the year. How much is the noncurrent liabilities as of January 1, 20x1? How much is the current assets as of December 31, 20x1? How much is the noncurrent assets as of December 31, 20x1? Reconstruction of financial statements The ledger of LOQUACIOUS TALKATIVE Co. in 20x1 includes the following: Cash 400,000 Accounts receivable 800,000 Inventory 2,000,000 Accounts payable 600,000 Note payable 200,000 During the audit of LOQUACIOUS’s 20x1 financial statements, the following were noted by the auditor:  Cash sales in 20x2 amounting to ₱40,000 were inadvertently included as sales in 20x1. LOQUACIOUS recognized gross profit of ₱12,000 on the sales.  A collection of an ₱80,000 accounts receivable in 20x2 was recorded as collection in 20x1. A cash discount of ₱4,000 was given to the customer.  During January 20x2, a short-term bank loan of ₱100,000 obtained in 20x1 was paid together with ₱10,000 interest accruing in January 20x2. The payment transaction in 20x2 was inadvertently included as a 20x1 transaction. How much is the adjusted working capital as of December 31, 20x1?

Use the following information for the next two questions: The following are among the expenses incurred by GYRATE REVOLVE Co. during the year. in ‘000s Interest expense ₱ 48 Cost of inventories sold 1,200 Insurance expense 200 Advertising expense 40 Freight-out 20 Freight-in 8 Loss on sale of equipment 4 Legal and other professional fees 24 Rent expense (one-half occupied by sales department) 16 Sales commission expense 28 Doubtful accounts expense 32 How much are the distribution costs or selling expenses? How much are the administrative expenses? The records of MARAUD PLUNDER Co. showed the following information: Increase in accounts receivable 200,000 Collections on accounts 1,600,000 Cash sales 240,000 Increase in inventory 80,000 Freight-in 28,000 Freight-out 26,000 Decrease in accounts payable 120,000 Disbursements for purchases 960,000 Purchase discounts 8,000 How much is the gross profit for the year? The records of DEADLOCK STANDSTILL Co. showed the following information: Accounts receivable, net, Jan. 1, 20x1 80,000 Accounts receivable, net, Dec. 31, 20x1 320,000 Accounts receivable turnover 4:1 Inventory, Jan. 1, 20x1 240,000 Inventory, Dec. 31, 20x1 120,000 Inventory turnover 3:1 How much is the gross profit for the year? The records of CANDOR FAIRNESS Co. showed the following information: Decrease in accounts payable 120,000 Disbursements for purchases 880,000 Increase in raw materials 200,000 Direct labor is 50% of raw materials used in production Manufacturing overhead is 20% of prime costs Increase in work-in-process inventory 80,000 Decrease in finished goods inventory 100,000 How much is the cost of goods sold?

PRELIM EXAMINATION IN FINANCIAL ACCOUNTING III NAME:_________________________________________ SECTION:_______________ DATE:__/__/____ GENERAL INSTRUCTIONS: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

Answer each question correctly. Kindly write your answers in your 10 or 12 columns worksheet. A mere answer without supporting computation shall not be given any credit. Strictly no erasures. No one is allowed to use friction pen and or correction tape/fluid Cheating is prohibited and violators shall be dealt with the full extent of the rules and regulations of the Colegio. Using of cellphones, tablets and other gadgets, except for non programmable calculators are not allowed. One student at a time shall be allowed for urine break with a maximum time limit of 3 minutes. Should you have any question please raise or ask it to the professor and not to your seatmates. For students with failing marks you must return this part of the exam to your professor after your parent/s or guardian/s signed the lower portion of this paper.

SCORE:______________

RATING:_____________

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