Financial Statements

DLSU

Integrated Financial Accounting FINANCIAL STATEMENTS I. Statement of Financial Position Problem 1. The following elements of Financial Statements are provided from the Trial Balance of Ford Inc. for the year ended December 31,2011: Preference Share at par Cash and cash equivalents (net of P200,000 overdraft) Land Held for Sale Bonds Payable due on December 31,2013 Deferred Tax Liability (P500,000 each to be realized in 2012, 2013, and 2014) Revaluation Surplus Salaries Payable Cash surrender value of insurance Note payable - payable in four installments semiannually on June 30 and December 31 Interest Payable Inventory – (P200,000 will be realized in 15 months) Investment Property Biological Assets Prepaid Asset and Office Supplies Accounts Payable (net of P100,000 with debit balance)

P 100,000 1,000,000 2,000,000 1,500,000 300,000 200,000 100,000 50,000 400,000 30,000 600,000 500,000 200,000 300,000 400,000 Accounts Receivable – (P500,000 will be realized in 15 months) (net of P200,000 with Cr. Balance) 1,500,000 Contingent Asset 300,000 Contingent Liability 200,000 Provision for lawsuit (payable on December 31,2012) 500,000 Unamortized Premium on Bonds Payable 300,000 Investment in Trading Securities 3,000,000 Ordinary Share at par 500,000 Donated Capital 200,000 Deferred tax asset (P100,000 each to be realized in 2012, 2013 and 2014) 300,000 Income tax payable 100,000 Allowance for bad debts 200,000 Intangible Assets 2,000,000 Property, Plant and Equipment 5,000,000 Additional Paid In Capital in excess of par – Ordinary Shares 1,000,000 Investment in Available for Sale Securities 2,000,000 Unamortized Discount on Bonds Payable 100,000 Unamortized Discount on Bonds Receivable 400,000 Investment in Preference Shares of SM @ cost method 3,000,000 Investment in Ordinary Shares of BDO @ equity method 4,000,000 Share options 500,000 Treasury Shares 600,000 Accumulated Depreciation – PPE 800,000 Accumulated Amortization – Intangible Assets 200,000 Conversion Option 400,000 Cumulative translation debit – foreign operation 300,000 Subscribed Ordinary Share @ par 200,000 Retained Earnings appropriated for plant expansion – December 31,2011 5,000,000 Bond Sinking Fund for the Bonds Payable 1,500,000 Plant Expansion Fund – to be disbursed on January 30,2012 5,000,000 Cumulative unrealized gain on Available for Sale Securities 200,000 Additional Paid in Capital in excess of par – Preference Shares 2,000,000 Utilities Payable 300,000 Share Dividends Payable @ par (large share dividend) 1,000,000 Cash Dividends Payable on January 10,2012 100,000 Cumulative Unrealized loss on derivative designated in cash flow hedge (effective portion) 300,000 Actuarial Loss – Full Recognition Approach 400,000 Dividends Receivable from Investment in Associate 200,000 Interest Receivable from Notes Receivable 300,000 Investment in Joint Venture 2,000,000 Investment in Subsidiary 3,000,000 Notes Receivable – due on December 31,2012 2,000,000 Loan Receivable – realizable in in five equal annual installments every June 30 5,000,000 Investment in Bonds Receivable – Held to Maturity Securities due on December 31,2013 2,400,000 Cumulative unrealized gain on FLFVPL due to credit risk 100,000 Total Lease Liability (P200,000 principal will be due on September 31,2012) 1,200,000 Retained Earnings unappropriated – January 1,2011 2,000,000 Note: The only transactions that affect the retained earnings unappropriated for the year are the net income for 2011 and dividends declared.

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Required: Based on the result of your audit, determine the following as of December 31,2011: ____________1. Total Current Assets ____________2. Total Noncurrent Assets ____________3. Total Assets ____________4. Total Current Liabilities ____________5. Total Noncurrent Liabilities ____________6. Total Liabilities ____________7. Total Shareholder’s Equity ____________8. Total Retained Earnings – December 31,2011 ____________9. Total Retained Earnings – Appropriated - December 31,2011 ____________10. Total Retained Earnings – Unappropriated – December 31,2011 ____________11. Profit or Loss for the year ended December 31,2011 II. ACCOUNTING EQUATION Problem 1. DLSU Co. provided the following data regarding its financial position: January 1,2013 Current Asset P2,000,000 Current Liability ? Noncurrent Asset 5,000,000 Noncurrent Liability 3,000,000 The following additional data are provided: 1. The current ratio of DLSU Co. at the start of the year is 2:1. 2. The debt ratio at the end of the year is 40%. 3. Current Assets increased to P3,000,000 during the year. 4. Noncurrent assets increased by P2,000,000 during the year. 5. Noncurrent liability decreased to P1,000,000 during the year. Required: Determine the following: __________1. Current Liability on January 1,2013 __________2. Equity on January 1,2013 __________3. Current Liability on December 31,2013 __________4. Equity on December 31,2013 III. EVENTS AFTER REPORTING PERIOD: (Adjusting and Non-adjusting Events) Problem 1. The financial statements of Benz Inc. are submitted to the external auditor on February 15,2012. The external auditor issued the unqualified audit opinion on February 28,2012. The board of directors approved and authorized the issuance of financial statements on March 15,2012. The stockholder’s ratified the issuance on March 31,2012. The following events after reporting period of Benz Inc. are presented for the year ended December 31,2011: a. On December 10,2011, Benz was charged by DENR of Environmental Regulation Violation. On December 31,2011, the defense counsel of Benz believed that it is probable that Benz will lose in the law suit and will be liable in the range of P1,000,000 to P3,000,000. At that time, there is no best estimate of liability. On March 10,2012, the Supreme Court of the Philippines decided against the defendant Benz and award P2,500,000 amount of damages to DENR. b. On December 15,2011, Benz was charged by the Benz Labor Union for Unfair Labor Practice in the Labor Arbitrer. On December 31,2011, the defense counsel of Benz believed that it is reasonably possible that Benz will lose in the labor dispute. The reasonable estimate of the liability is P1,000,000. On March 20,2012, the Supreme Court decided in favor of the Benz Labor Union and awarded P1,500,000 amount of damages. c. On January 10,2012, Benz was charged by Ford of Patent Infringement. On such date, the defense counsel of Benz believed that it is probable that Benz will lose in the case. On March 12,2012, the Supreme Court ruled in favor of Ford and awarded P500,000 of damages to the plaintiff. d. On December 25,2011, Benz filed a civil case against Honda. The defense counsel of Benz believed that it is probable that Benz will prevail in the civil case. The reasonable amount of damages is P3,000,000. The case was decided by the Supreme Court on April 1,2012 and awarded P4,000,000 amount of damages to Benz. e. On November 15,2011, Benz filed a civil case against Toyota. The defense counsel of Benz believed that it is reasonably possible that Benz will prevail in the civil case. The reasonable amount of damages is P1,800,000. The case was decided by the Supreme Court on April 10,2012 and awarded P2,500,000 amount of damages to Benz. f. On September 30,2011, an employee of Benz filed a civil case against Benz. The defense counsel of Benz believed that it is remote that Benz will lose the case and the reliable estimate of liability is P200,000. The case was decided by Supreme Court on March 30,2012 and awarded P300,000 amount of damages to the employee of Benz. g. On December 31,2011, Benz has an outstanding receivable from Way Inc. in the amount of P5,000,000. On March 14,2012, Way Inc. declared bankruptcy and the Court placed the company under receivership. On such date, the receiver declared that only 40% of the payable of Way will be liquidated. h. On March 10,2012, the Investment Property of Benz Inc. was razed by fire. The carrying value of such property on December 31,2011 is P10,000,000. i. On March 16,2012, the warehouse containing the inventory of Benz Inc. was destroyed by earthquake. The total from such calamity is P25,000,000. j. On January 20,2012, Benz Inc. acquired 100% interest of Ferrari Inc. for P100,000,000.

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Required: Based on the result of your audit, provide the treatment of the preceding events after reporting period: ________________________1. Event A ________________________2. Event B ________________________3. Event C ________________________4. Event D ________________________5. Event E ________________________6. Event F ________________________7. Event G ________________________8. Event H ________________________9. Event I ________________________10. Event J IV. Statement of Comprehensive Income Problem 1. The income tax rate for the year is 30%. The following income and expense accounts are obtained from the Trial Balance of Ferrari Inc., which is a diversified company, for the year ended December 31,2011: Deferred Tax Expense P1,200,000 Impairment loss on Non-current Asset Held for Sale, before tax 300,000 Gain on sale of Non-current Asset Held for sale, before tax 400,000 Sales 40,000,000 Purchases of Raw Materials 10,000,000 Bad debts expense 100,000 Impairment loss on Loans Receivable 200,000 Gain on factoring of Accounts Receivable 400,000 Loss on Notes Receivable Discounting 100,000 Purchase discount and allowance on Raw Materials 300,000 Sales discount and allowance 400,000 Purchase return on Raw Materials 500,000 Sales return 200,000 Freight In on Raw Materials 300,000 Direct Labor 1,000,000 Factory Overhead – 50% of Direct Labor ? Raw Materials, January 1 2,000,000 Raw Materials, December 31 3,000,000 WIP, January 1 1,500,000 WIP, December 31 2,500,000 Finished Goods, January 1 5,000,000 Finished Goods, December 31 3,000,000 Gain on changes in Fair Value less cost to sell of Biological Assets 1,000,000 Unrealized holding gain on Trading Securities 2,000,000 Realized loss on sale of Trading Securities 500,000 Unrealized holding loss on Available for Sale Securities Equity Instruments 3,000,000 Realized gain on sale of Available for Sale Securities Equity Instruments 1,000,000 Unrealized holding gain on Available for Sale Securities Debt Instruments 2,000,000 Realized gain on sale of Available for Sale Securities Debt Instruments 1,500,000 Share dividend received from Investment in SMC @ cost method(fair value of OS) 500,000 Cash and property dividend received from Investment in SMC @ cost method 300,000 Cash and property dividend received from Investment in BDO @ equity method 200,000 Share in net loss from Investment in BDO @ equity method 500,000 Interest received from Investment in Held to Maturity Securities 300,000 Amortization of Premium on Held to Maturity Securities 20,000 Realized loss on sale of Investment in Held to Maturity Securities 400,000 Loss on changes in far value of Investment Property 500,000 Realized gain on sale of Investment Property 100,000 Unrealized holding loss on derivative – designated as fair value hedge 500,000 Unrealized holding gain on derivative – designated as cash flow hedge 1,000,000 Translation adjustment debit – Foreign Operation 2,000,000 Transaction gain from foreign exchange transaction 500,000 Realized deferred income from government grant 400,000 Depreciation on Property, Plant and Equipment 3,000,000 Depletion of Wasting Asset 2,000,000 Loss on sale of an item of Property, Plant and Equipment 1,000,000 Increase in Revaluation Surplus during 2011 2,000,000 Realized Revaluation Surplus during 2011 200,000 Impairment loss of Property, Plant and Equipment 500,000 Amortization of Intangible Asset 400,000 Pre-organization cost 200,000 Research and development cost 300,000 Stock issuance cost of Ordinary Shares 200,000 Warranty Expense 500,000

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Premium Expense Current Tax Expense Interest Paid on Bonds Payable Amortization of Discount on Bonds Payable Amortization of Bonds Payable Issue cost Actuarial Gain – Full Recognition Approach Employee Benefit Expense Gain on debt restructuring – asset swap Gain on debt restructuring – equity swap Gain on debt restructuring – modification of terms (5% of original liability) Interest Expense on Finance Lease Gain on sale and leaseback – operating lease Loss on sale and leaseback – finance lease Compensation Expense – Share Options Compensation Expense – Share appreciation rights Revenue from discontinued operation, before tax Expenses from discontinued operation, before tax Impairment loss of assets of discontinued operation, before tax Realized gain on sale of assets of discontinued operation, before tax Expense from Law Suit Freight Out Sales Commission Salary of Marketing Department’s employees Advertising Expense Salary of legal counsel Salary of directors and executives Salary of accounting department Office Supplies used Rental Expense on Main building Utilities Expense Extraordinary loss from calamity Unrealized holding loss from FAFVPL – due to credit risk Unrealized holding loss from FAFVPL – not due to credit risk

200,000 2,000,000 200,000 50,000 50,000 100,000 200,000 200,000 300,000 100,000 200,000 300,000 400,000 100,000 200,000 1,000,000 500,000 300,000 400,000 500,000 200,000 100,000 100,000 500,000 500,000 900,000 200,000 100,000 1,000,000 100,000 300,000 400,000 200,000

Additional notes during 2011 are also provided as follows: 1. 2. 3. 4.

The depreciation of Property, Plant and Equipment is 60% administrative and 40% selling. The depletion of Wasting Asset is considered part of Other Expenses. The employee benefit expense is 80% administrative and 20% selling. The compensation expense from share option is for administrative department employees while that from share appreciation rights is for selling department employees. 5. The rental, utilities and office supplies expense is equally divided between administrative and selling departments. 6. Finance cost is separated from other expenses. 7. Ferrari uses the functional or cost of sale format in preparing its Statement of Comprehensive Income. Required: Based on the result of your audit, determine the following for the year ended December 31,2011: ____________1. Cost of Sales ____________2. Gross Profit ____________3. Total Other Income ____________4. Administrative Expense ____________5. Selling Expense ____________6. Total Other Expense ____________7. Total Income Tax Expense ____________8. Income from Continued Operation ____________9. Income or (loss) from discontinued operation ____________10. Profit or Loss ____________11. Net Other Comprehensive Income ____________12. Total Comprehensive Income

V. CAPITAL MAINTENANCE APPROACH Problem 1. On January 1, 2013, the total assets of LLB Inc. is P2,000,000 while its total liabilities is P1,200,000. During the year, the corporation issued 20,000 ordinary shares with par value of P10 for P20/share. The corporation also declared and paid cash dividends in the amount of P100,000 and distributed property dividends with book value of P100,000 and fair value of P500,000. During 2013, the total assets increased to P5,000,000 while the total liabilities increased by P1,800,000. Nothing affects the total stockholder’s equity accounts except the transactions provided and profit or loss. What is the profit/ (loss) of LLB Inc. for the year ended December 31,2013?

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VI. NON-CURRENT ASSET HELD FOR SALE Problem 1. On January 1, 2013, JD Inc. constructed a building classified as owner-occupied property for a total cost of P2,200,000 with useful life of 10 years and residual value of P200,000. It is the company’s policy to use the cost method of valuation for property, plant and equipment. On December 31, 2013, the company determined that the carrying amount of the building will be recovered principally through a sale transaction rather than through continuing use. The following amounts are provided by a qualified appraiser: 12/31/2013 12/31/2014 12/31/2015 Value in Use P2,500,000 P2,300,000 P2,000,000 Fair Value less Cost to Sell 1,500,000 1,400,000 1,300,000 On December 31, 2015, JD Inc. decided not to sell the building and it no longer met the criteria for being classified as held for sale. Required: Based on the result of your audit, determine the following: ____________1. Carrying amount of building on 12/31/2013 ____________2. Impairment loss of building for the year ended 12/31/2013 ____________3. Carrying amount of building on 12/31/2014 ____________4. Impairment loss of building for the year ended 12/31/2014 ____________5. Depreciation expense of building for the year ended 12/31/2014 ____________6. Carrying amount of building on 12/31/2015 ____________7. Reversal of impairment loss for the year ended 12/31/2015 VII. DISCONTINUED OPERATION Problem 1. On January 1,2013, ABS-CBN, a communication entity, has decided to dispose one of its radio operations known as DZMM SAIS TRENTA. During 2013, the total revenues from the operation of DZMM is P50,000,000 while its total operating expenses is P40,000,000. During 2013, the post-tax impairment loss of the assets of DZMM amounts to P5,000,000. On December 31,2013, DZMM sold one of its satellites with a cost of P5,000,000 and accumulated depreciation of P2,000,000. The selling price of the satellite is P6,000,000 and its fair value is P4,000,000. During 2013, DZMM also incurred pre-tax termination costs of P1,000,000 as a result of the discontinuance. The normal corporate income tax for year 2013 is 30%. What is the single amount to be presented in the line item-discontinued operation of the 2013 Statement of Comprehensive Income of ABS-CBN? VIII. Change in Accounting Estimate Problem 1. On January 1,2013, Wayne Inc. acquired a machine for P530,000 with useful life of 5 years and residual value of P30,000. It is the company’s policy to use SYD method for depreciation of its property, plant and equipment. On January 1, 2015, due to new information, Wayne Inc. changed its depreciation method from SYD to Straight Line Method. Aside from that, the revised useful life is 7 years from the date of acquisition. There is no change in the residual value. Required: Based on your audit, determine the following: ____________1. Depreciation expense for the year ended December 31,2015 ____________2. Carrying value of the machine as of December 31,2015 Problem 2. On January 1,2013, Queen Inc. purchased an equipment for P120,000 with useful life of 4 years and residual value of P20,000.It is the company’s policy to use 200% Double Declining Balance Method for depreciation of its property, plant and equipment. On January 1,2014, due to new information, Queen changed its depreciation method from Double Declining Balance Method to SYD Method. The remaining useful life as of January 1,2014 is 2 years. The residual value is also revised to P15,000. What is the cumulative effect of these accounting changes in the January 1,2014 Retained Earnings to be presented in the 2014 Statement of Changes in Equity assuming the tax rate is 30%? IX. Change in Accounting Policy Problem 1. On January 1,2013, Arrow Inc. started its operation. It is the company’s policy to provide bad debts expense based on 5% of its ending receivables. The following data are also provided on December 31,2013: Accounts Receivable P1,000,000 Allowance for Bad Debts 50,000 Credit Sales 3,000,000 Written off Receivables 30,000 On January 1,2014, the company changed its accounting policy for providing bad debts expense from 5% of ending receivables to 10% of credit sales. During 2014, the following data are also provided: Accounts Receivable 12/31/2014 P2,000,000 Credit Sales 5,000,000 Recovery of previously written off AR 20,000 Written off Receivables 40,000 What is the cumulative effect of this accounting change in the January 1,2014 Retained Earnings to be presented in 2014 Statement of Changes in Equity assuming the tax rate is 30%?

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Problem 2. On January 1,2014, IRON Inc. decided to change its accounting policy for costing of its inventory from FIFO to Weighted Average. The following data are provided: FIFO WEIGHTED AVERAGE 12/31/2012 P1,000,000 P1,500,000 12/31/2013 2,000,000 1,000,000 12/31/2014 3,000,000 5,000,000 What is the cumulative effect of this accounting change in the January 1,2014 Retained Earnings to be presented in 2014 Statement of Changes in Equity assuming the tax rate is 30%? Problem 3. On January 1,2013, THOR Inc. acquired a building to be held as investment property in the amount of P3,300,000. The building has a residual value of P300,000 and has a useful life of 6 years. It is the company’s policy to use cost method for the valuation of its investment property. On January 1,2015, THOR Inc. decided to change its accounting treatment of its investment property from cost method to fair value method. The following fair values are also provided: December 31,2013 P3,500,000 December 31,2014 3,000,000 December 31,2015 3,200,000 What is the cumulative effect of this accounting change in the January 1,2015 Retained Earnings to be presented in 2015 Statement of Changes in Equity assuming the tax rate is 30%? Problem 4. On January 1,2010, Stretchy Inc. acquired 10,000 Ordinary Shares of PLDT Inc. which has 100,000 outstanding shares for P200,000. The book value of net asset of PLDT is P1,000,000. There is no difference between the book value and fair value of assets of PLDT Inc. On December 31,2010, PLDT reported P500,000 net income and paid a cash dividend of P2 per share. On January 1,2011, Stretch acquired additional 10,000 Ordinary Shares of PLDT Inc. for P300,000. The outstanding shares of PLDT on such date is still 100,000. On December 31,2011, PLDT reported net income of P1,000,000 and paid P2 per share dividends. On January 1,2012, Stretch sold 5,000 Ordinary shares of PLDT for P30 per share. The fair value of PLDT’s ordinary share is quoted at P35 per share on the date of sale. Note: The income tax rate is 30%. Required: 1. What is the retroactive adjustment in the January 1,2011 Retained Earnings as a result of the step-up acquisition? 2. What is the gain as a result of step-up acquisition on January 1, 2011? 3. What is the gain or (loss) on the disposal of PLDT’s ordinary share on January 1,2012? 4. What is the gain or (loss) as a result of the cessation of Equity Method on January 1,2012? X. Statement of Changes in Equity Problem 1. The following data are provided by BMW Inc. for the year ended December 31,2011 regarding its Statement of Changes in Equity: Retained Earnings, January 1,2011 P2,000,000 Ordinary Share Capital, January 1,2011 1,000,000 Preference Share Capital, January 1,2011 500,000 Profit or (Loss) for the year 2011 2,000,000 Dividends Declared during 2011 1,500,000 Prior Period Error – understatement of 2010 Net Income (net of tax) 700,000 Change in Accounting Policy – overstatement of 2010 Ending Inventory (net of tax) 350,000 Treasury Shares @ cost 200,000 Additional Paid In Capital in excess of par – Ordinary Shares 2,000,000 Additional Paid in Capital in excess of par – Preference Shares 1,000,000 Subscribed Ordinary Shares 1,500,000 Subscription Receivable (collectible beyond one year) 500,000 Realization of Revaluation Surplus during 2011 200,000 Realized holding loss on AFS Securities Equity Instruments 100,000 Realized holding gain on AFS Securities Debt Instruments 400,000 Realized translation debit on Foreign Operation 500,000 Realized gain on derivative asset classified as cash flow hedge – effective portion 300,000 Realized loss on FAFVPL due to credit risk 600,000 Realized actuarial gain on defined benefit plan 400,000 Excess over cost in Reissuance of Treasury Shares 300,000 Translation Credit Adjustment – Foreign Operation 200,000 Unrealized holding loss – Available for Sale Securities 500,000 Unrealized holding gain – Derivative designated as Cash Flow Hedge 400,000 Actuarial Loss – Full Recognition Approach 600,000 Unrealized loss on FAFVPL due to credit risk 300,000 Required: What is the adjusted balance of Retained Earnings on December 31,2011?

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XI. Classification of Operating, Investing and Financing Activities. Indicate the proper classification of the following cash flows by using O for Operating, I for Investing and F for financing. ___Cash paid for the acquisition of merchandise inventory ___Cash received from the sale of available for sale securities ___Cash received from the sale of trading securities ___Cash paid for the acquisition of treasury shares ___Cash paid for salaries of employees and officers ___Cash paid to stockholders as distribution of earnings ___Cash received from investment in associate ___Cash paid for interest on loans payable ___Cash received for interest on notes receivable ___Cash paid for acquisition of call option ___Cash received from the sale of investment property ___Cash paid for acquisition of land to be classified as property, plant and equipment ___Cash received from bank loan ___Cash paid for advances to subsidiary ___Cash received from customers ___Cash paid for utilities ___Cash paid for taxes ___Cash received from investment of stockholders ___Cash paid for acquisition of held to maturity securities ___Cash paid for acquisition of patent ___Cash paid for the disposal of trademark ___Cash paid for acquisition of prepaid insurance ___Cash received from the sale of factory equipment XII. Direct Method. A. Collection from Customers. Problem 1. The following data are provided by James Inc. for the year ended December 31,2013: Total Sales P20,000,000 Cash received from cash customers 5,000,000 Factored accounts receivable 1,000,000 Dishonored notes receivable 3,000,000 Interest on dishonored notes receivable 500,000 Recovery of previously written off accounts receivable 300,000 Written off accounts receivable during the year 200,000 Sales discount availed by customers during the year 100,000 Credit memo issued by James Inc. during the year 400,000 Bad debt expense during the year 800,000 The following balances are provided: Accounts Receivable, January 1,2013 P10,000,000 Net realizable value of AR, January 1,2013 9,500,000 Net realizable value of AR, December 31,2013 12,000,000 What is the total collection from customers for the year ended December 31, 2013? Problem 2. The following data are provided by Lebron Inc. for the year ended December 31,2013: 12/31/2012 12/31/2013 Trade AR P1,000,000 P2,000,000 Trade NR 3,000,000 3,500,000 Unearned Revenue 5,000,000 2,000,000 The total revenue reported by Lebron Inc. on its Income Statement for the year ended December 31,2013 is P10,000,000. What is the total cash collected from customers for the year ended December 31, 2013? B. Cash Paid to Suppliers Problem 1. The following data are provided by Dwayne Inc. for the year ended December 31,2013: 12/31/2012 12/31/2013 Merchandise Inventory P2,000,000 P2,500,000 Accounts payable 3,000,000 4,000,000 Purchase discount 500,000 Credit memo issued by suppliers 300,000 Note payable issued for some accounts payable 200,000 Cost of goods sold for year 2013 9,000,000 What is the total cash paid to suppliers for the year ended December 31, 2013? C. Cash Paid for Operating Expense Problem 1. The following data are provided by Wade Inc. for the year ended December 31,2013: 12/31/2012 12/31/2013 Prepaid salary P1,000,000 P1,500,000

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Accrued salary 2,500,000 5,000,000 Salary expense for year 2013 7,000,000 What is the total cash paid for salaries for the year ended December 31, 2013? Problem 2. The following information are provided concerning the operating expenses of TY Inc.: 12/31/2010 Prepaid Expenses 1,000,000 Accrued Expenses 2,000,000 Total Operating Expenses Acc. Depreciation 3,000,000 Acc. Amortization 2,000,000

12/31/2011 3,000,000 2,500,000 10,000,000 4,000,000 2,500,000

The following notes are also provided: a. Non-cash expenses such as amortization expense and depreciation expense are included in the total operating expenses. b. During the year, TY sold equipment with a cost of P2,000,000. The net proceeds from the sale of equipment is P2,100,000 and the gain on disposal is P500,000. c. During the year, TY sold patent with a cost of P1,000,000. The net proceeds from the sale of patent is P600,000 and the loss on disposal is P200,000. What is the cash basis operating expenses for the year ended December 31, 2011? Problem 3. The following information are provided by LA Inc. concerning its interest expense: 12/31/2010 12/31/2011 Prepaid Interest 100,000 150,000 Accrued Interest Payable 250,000 100,000 Discount on Bonds Payable 300,000 150,000 Premium on Bonds Payable 250,000 50,000 The following data are also provided: a. During 2011, LA extinguished some Bonds Payable originally issued at a discount with a face value of P1,000,000 through asset swap. The book value of the land given up is P1,100,000 and the fair value is P1,200,000. The extinguishment of Bonds Payable resulted to a loss of P150,000. b. During 2011, LA extinguished some Bonds Payable originally issued at a premium with a face value of P2,000,000 by payment of P2,000,000. The extinguishment resulted to a gain of P100,000. c. The total interest expense for the year is P2,000,000. What is the cash paid for interest for the year ended December 31, 2011? D. Cash Paid for Taxes Problem 1. The following data are provided by Chris Inc. for the year ended December 31,2013: 12/31/2012 12/31/2013 Prepaid taxes P1,500,000 P1,000,000 Income tax payable 2,000,000 3,000,000 Deferred tax asset 2,000,000 4,000,000 Deferred tax liability 3,000,000 2,000,000 Current Tax Expense for year 2013 5,000,000 Deferred Tax Expense for year 2013 6,000,000 What is the total cash paid for taxes for the year ended December 31, 2013? E. Cash Collected from Interest Problem 1. The following data are provided by Bosh Inc. for the year ended December 31,2013: 12/31/2012 12/31/2013 Interest receivable P3,000,000 P2,000,000 Unearned interest 2,000,000 2,500,000 Interest revenue for year 2013 12,000,000 What is the total collected interest for the year ended December 31, 2013? Problem 2. The following information are provided concerning the interest income of AT Inc. for 2011: Unearned Interest Income Accrued Interest Income Discount on Bonds Rec. Premium on Bonds Rec.

12/31/2010 200,000 400,000 500,000 400,000

12/31/2011 100,000 500,000 300,000 100,000

The following data are also provided: a. During 2011, AT sold the Bonds Rec. with a face value of P1,000,000 and which was originally purchased at a discount. The net proceeds of the sale was P950,000. Gain on derecognition of Bonds Receivable was P100,000.

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b. During 2011, AT sold the Bonds Rec. with a face value of P1,000,000 and which was originally purchased at a premium. The net proceeds of the sale was P1,100,000. Loss on derecognition of Bonds Receivable was P50,000. c. The total interest revenue for the year was P3,000,000. What is the total cash collected from interest for the year ended December 31, 2011? F. Cash Paid for Dividends Problem 1. The following information are provided regarding the Retained Earnings of AIM Inc.: Retained Earnings Cash Dividends Payable

12/31/2010 2,500,000 3,500,000

12/31/2011 2,000,000 1,000,000

The following notes are also provided: 1. On January 1,2011, AIM changed its inventory costing method from FIFO to Weighted Average. The FIFO cost on January 1, 2011 is P1,000,000 while the Weighted Average Cost is P2,000,000. The tax rate is 30%. 2. On June 1,2011, AIM reissued treasury shares with a total cost of P1,000,000 in the amount of P500,000. There was no share premium arising from treasury shares transaction at the time of re-issuance of treasury shares. 3. On December 31,2011, AIM declared cash dividends and property dividends. The book value of property dividends at that date is P400,000 while the fair value is P600,000. 4. The adjusted net income for 2011 was P1,500,000. What is the amount of dividends paid in cash for 2011? G. Investing Activity Problem 1. The following information are provided affecting JT’s Land: 12/31/2010 12/31/2011 Land 2,000,000 1,000,000 The following notes are also provided: 1. On January 1,2011, JT purchased land by paying P100,000 in cash. 2. On February 1,2011, JT received a land from government with a book value P200,000 and fair value of P300,000. 3. On March 1,2011, JT issued 10,000 ordinary shares in exchange of a land with a fair value of P400,000. The fair value of ordinary shares is P30 per share and the par value is P10. 4. On April 1, 2011, JT sold land to another company. In exchange to the lan, JT received a promissory note of P500,000. 5. On May 1,2011, JT sold land to the government for cash. JT realized P200,000 gain on disposal of land. What is the net cash inflow (outflow) from investing activitiy for 2011?

Problem 2. The following information are provided affecting DV’s Noncurrent Asset: 12/31/2010 12/31/2011 Machinery & Equip. 3,500,000 1,500,000 Patent 3,000,000 1,000,000 Accumulated Dep. 500,000 300,000 Accumulated Amort. 600,000 200,000 The following notes are also provided: 1. On January 1,2011, DV purchased machinery by paying P500,000 in cash. 2. On February 1,2011, DV purchased patent by paying P300,000 in cash. 3. On March 1,2011, DV received equipment as dividend from an investee company with a book value of P300,000 and fair value of P400,000. 4. On April 1,2011, DV purchased a patent in the amount of P600,000. DV issued a promissory note in that amount. 5. On May 1,2011, DV issued 5,000 Preference Shares with a fair value of P20 per share and par value of P10 in exchange for a machinery. The fair value of the machinery is P300,000. 6. On June 1,2011, DV sold a patent for cash. The total amortization expense for the year was P400,000. The loss on disposal of patent was P600,000. 7. On July 1,2011, DV sold an equipment for cash. The total depreciation expense for the year was P800,000. The gain on disposal was P500,000. What is the net cash inflow (outflow) from investing activity for 2011?

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Problem 3. The following information are provided affecting JD’s Investment in Associate with a 20% ownership: Investment in Associate

12/31/2010 2,000,000

12/31/2011 1,000,000

The following notes are also provided: 1. The investee company reported a net income of P1,000,000 and total other comprehensive income with a debit balance of P500,000 as of December 31,2011. 2. The investment was acquired in the beginning of 2009 and the total fair value of consideration given up is higher than book value of net assets acquired. The differences are attributed to the following: Book Value Fair value Land 1,000,000 1,100,000 Building 1,200,000 1,700,000 Equipment 1,200,000 1,100,000 Inventory 1,200,000 1,400,000 All beginning inventories of Investee in 2009 were sold in that year. The building has a useful life of 10 years from January 1,2009 while the equipment has 4 years useful life. 3. JD Inc. received a property dividend and cash dividend for the year. The book value of the property dividend is P200,000 while the fair value is P300,000. Assuming the company presents dividend received as part of Operating Activity, What is the amount of cash received from Investment in Associate?

XIII. Indirect Method Problem 1. The following summarized data are provided from the Statement of Financial Position and Income Statement of Miami Heat Inc. STATEMENT OF FINANCIAL POSITION Current Asset Section Current Liability Section 12/31/2012 12/31/2013 12/31/2012 12/31/2013 Cash and CE P1,000,000 P2,000,000 Accounts Payable P2,000,000 P3,000,000 Trading Securities 300,000 200,000 Accrued Expenses 1,000,000 500,000 AR, net 500,000 300,000 Income tax payable 500,000 600,000 Inventory 1,500,000 2,500,000 Interest payable 300,000 100,000 INCOME STATEMENT Net Sales P10,200,000 Less: Cost of Goods Sold (5,000,000) Gross Profit P 5,200,000 Less: Operating Expenses (including P200,000 depreciation) ( 2,000,000) Net Operating Income P 3,200,000 Add: Gain on sale of investment property 500,000 Less: Amortization of patent (300,000) Loss on sale of factory equipment (400,000) Income before tax P 3,000,000 Less income tax expense 900,000 Net Income P 2,100,000 What is the net cash flow from operating activities for the year ended December 31, 2013?

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XIV. Comprehensive Problem

Problem 1. The net changes in the statement of financial position of ACER Corporation for the year 2008 are shown below: Accounts Debit Credit Cash 82,000 Available for sale securities 121,000 Accounts receivable 83,200 Allowance for bad debts 13,300 Inventory 74,200 Prepaid expenses 17,800 Investment in wholly owned subsidiary at equity 20,000 Plant and equipment 210,000 Accumulated depreciation 130,000 Accounts payable 80,700 Accrued liabilities 21,500 Deferred tax liability 15,500 8% Serial Bonds 80,000 Ordinary share capital, P10 par 90,000 Share premium 150,000 Retained earnings – Appropriation for bonds 60,000 Retained earnings – Unappropriated 38,000 643,600 643,600 An analysis of the Retained earnings account follows: Retained earnings – unappropriated, 12/31/2007 Add: Net Income for 2006 Transfer from appropriation for bonds Total Deduct: Cash dividends Share dividends Retained earnings – unappropriated – 12/31/2008

1,300,000 327,000 60,000 1,687,000 185,000 240,000

425,000 1,262,000

The following notes are also provided by the company: 1. On January 2,2008, marketable securities (classified as available for sale) costing P121,000 were sold for P155,000. 2. The company paid a cash dividend on February 1,2008. 3. Accounts receivable of P16,200 and P19,400 were considered uncollectible and written off in 2008 and 2007, respectively. 4. Major repairs of P33,000 to the equipment were debited to the Accumulated Depreciation account during the year. No assets were retired during 2008. 5. The wholly owned subsidiary reported a net loss for the year of P20,000. The parent recorded the loss. 6. At January 1,2008, the cash balance was P166,000. 1. How much should be the amount of net cash flows from operating activities? a. 295,000 c. 285,000 b. 275,000 d. 265,000 2. Assuming the same data provided in number 56, how much should be the amount of net cash flow from investing activities? a. (88,000) c. (108,000) b. (121,000) d. (68,000) 3. Assuming the same data provided in number 56, how much should be the amount of cash flow from financing activities? a. (135,000) c. (105,000) b. (85,000) d. (185,000)

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Problem 2. ASUS Corporation has recently decided to go public and has hired you as an independent CPA. One statement that the entity is anxious to have prepared is a statement of cash flows. Financial statements of ASUS for 2010 and 2009 are provided below. Statement of Financial Position 12/31/2010 12/31/2009 Cash 153,000 72,000 Accounts Receivable 135,000 81,000 Merchandise Inventory 144,000 180,000 PPE (net of Acc. Dep. of P120,000 and P114,000 as of 12/31/2010 and 12/31/2009, respectively) 108,000 246,000 540,000 579,000 Accounts payable Income taxes payable Bonds payable Share capital Retained earnings

66,000 132,000 135,000 81,000 126,000 540,000

36,000 147,000 225,000 81,000 90,000 579,000

Income Statement For the Year Ended December 31,2010 Sales Cost of sales Gross profit Selling expenses Administrative expenses Income from operations Interest expense Profit before taxes Income taxes Profit or loss

3,150,000 2,682,000 468,000 225,000 72,000

297,000 171,000 27,000 144,000 36,000 108,000

The following additional data were provided: 1. Dividends for the year 2010 were P72,000. 2. During the year, equipment was sold for P90,000. This equipment cost P132,000 originally and had a book value of P108,000 at the time of sale. The loss on sale was incorrectly charged to cost of sales. 3. All depreciation expense is in the selling expense category. 1. What is the net cash provided by operating activities? a. 153,000 c. 108,000 b. 90,000 d. 75,000 2. Assuming the same data provided in number 59, what is the net cash provided (used) by investing activities? a. (132,000) c. 18,000 b. 90,000 d. (108,000) 3. Assuming the same data provided in number 59, what is the net cash provided (used) by financing activities? a. (90,000) c. 18,000 b. (162,000) d. 72,000

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XV. Interim Reporting Problem 1. NYY Inc. prepares quarterly interim financial reports. On February 14, 2013, the company incurred a calamity loss resulting from an earthquake in the amount of P200,000. The calamity loss was paid by the company on November 1,2013. How much calamity loss shall be recognized in the interim income statements for the 1 st quarter, 2nd quarter, 3rd quarter and 4th quarter, respectively? Problem 2. NYM Inc. prepares quarterly interim financial reports. On the March 31,2013, the following data for inventory are provided: Cost P2,000,000 Estimated selling price 2,500,000 Gross profit rate based on sale 20% Estimated cost to complete 300,000 Estimated cost to sell 400,000 On June 30,2013, the following data for inventory are also provided: Cost P2,000,000 Estimated selling price 3,000,000 Gross profit rate based on sale 20% Estimated cost to complete 200,000 Estimated cost to sell 400,000 How much loss on inventory writedown shall be recognized in the interim income statements for the 1 st quarter, 2nd quarter, 3rd quarter and 4th quarter, respectively? How much gain on reversal of loss on inventory writedown shall be recognized in the interim income statements for the 1 st quarter, 2nd quarter, 3rd quarter and 4th quarter, respectively? Problem 3. BYN Inc. prepares quarterly interim financial reports. On January 1, 2013, the company paid P200,000 for advertisement which will benefit the whole year 2013. On April 1,2013, the company incurred repairs and maintenance in the amount of P300,000 and paid it on December 15,2013. The repairs and maintenance will only benefit the remainder of the year. How much advertising expense shall be recognized in the interim income statements for the 1 st quarter, 2nd quarter, 3rd quarter and 4th quarter, respectively? How much repairs and maintenance expense shall be recognized in the interim income statements for the 1 st quarter, 2nd quarter, 3rd quarter and 4th quarter, respectively? Problem 4. LAA Inc. prepares quarterly interim financial reports. The company provides bad debt expense 10% based on credit sales for the quarter. The company estimated that the total bad debt expense for year 2013 is P200,000. The company recognized bad debt expense for the 1 st, 2nd, and 3rd quarter in the amount of P30,000, P50,000 and P80,000 respectively. During the 4th quarter, the total credit sales is P600,000 and the company wrote off P50,000 accounts receivables. How much bad debt expense shall be recognized in the 4th quarter income statement? XVI. Operating Segment Problem 1. LAD Inc. has several operating segments. The following data are provided concerning its segments: Segment Total Assets Total External Revenue Total Internal Revenue Profit/(Loss) A P2,000,000 P 50,000 P 550,000 P 50,000 B 100,000 200,000 100,000 20,000 C 200,000 30,000 270,000 (100,000) D 3,000,000 20,000 180,000 30,000 E 700,000 100,000 1,900,000 (200,000) Required: Determine the following amounts: __________1. Quantitative threshold in assets to be considered as reportable segment __________2. Quantitative threshold in revenues to be considered as reportable segment __________3. Quantitative threshold in profit or loss to be considered as reportable segment __________4. 75% Quantitative threshold for reportable segments __________5. How many reportable segments should LAD Inc. disclose? Problem 2. TBR Inc. is considering providing disclosures for its major customers. The following data are provided concerning its operating segments: Segment T Total External Revenue Total Internal Revenue A P 500,000 P 100,000 B 200,000 50,000 C 300,000 150,000 D 100,000 180,000

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E

400,000

20,000

What is the minimum revenue to be provided by a customer to be considered a major customer which will require disclosures from TBR Inc.?

XVI. PFRS for SMEs 1. On January 1, 2014, PKI , a small and medium enterprise, borrowed a one-year P10,000,000 loan from BDO Inc. to finance specifically the construction of its new administrative building. The loan has an interest rate of 15%. Construction of the building started on January 1, 2014 and it was completed at the end of year 2014. Out of the total loan, P4,000,000 was temporarily invested by PKI to the BDO for a 90-day time deposit with 10% interest. PKI prepares financial statements in compliance with PFRS for SMEs. Assuming a 360-day period, what is the amount of borrowing cost to be capitalized to the building? a. P1,500,000 b. P1,100,000 c. P1,400,000 d. Zero 2. On January 1, 2014, BCH Inc.,a small and medium enterprise, acquired a trademark of HUMAN for P2,000,000. The remaining legal life of the trademark from the date of acquisition is 5 years but the Philippine Intellectual Property Law allows renewable of the useful life of any trademark before its expiration. BCH Inc. prepares financial statements in compliance with PFRS for SMEs. What is the amortization expense to be recognized by BCH Inc. for the year ended December 31, 2014? a. P200,000 b. P400,000 c. P2,000,000 d. Zero 3. LINE Inc., a small and medium enterprise, acquired 20,000 ordinary shares out of 100,000 ordinary shares of BDO Inc., a publicly traded entity in Philippine Stock Exchange on January 1, 2014. LINE Inc. purchased the BDO ordinary shares at P20/share. LINE incurred transaction costs totaling P50,000. LINE Inc. presents financial statements based on PFRS for SMEs. It decided to select fair value method in accounting for its investment in associate. BDO reported P900,000 net income and declared a total of P300,000 cash dividends during 2014. On December 31, 2014, the ordinary shares of BDO are trading at P30/share. The cost of selling the investment is P150,000. What is the initial amount recognized by LINE Inc. for its Investment in BDO Inc. on January 1, 2014? a. P450,000 b. P400,000 c. P350,000 d. P600,000 4. Using the same data in number 3, what is the total income to be recognized by LINE Inc. from its investment in BDO for the year ended December 31, 2014? a. P200,000 b. P180,000 c. P260,000 d. P240,000 5. Using the same data in number 3, what is the carrying value of Investment in BDO as of December 31, 2014? a. P520,000 b. P450,000 c. P570,000 d. P600,000 6. Using the same data in number 3, except that LINE decided to use equity method, what is the initial amount recognized by LINE Inc. for its Investment in BDO Inc. on January 1, 2014? a. P450,000 b. P400,000 c. P350,000 d. P600,000 7. Using the same data in number 3, except that LINE decided to use equity method, what is the total income to be recognized by LINE Inc. from its investment in BDO for the year ended December 31, 2014? a. P200,000 b. P180,000 c. P260,000 d. P240,000 8. Using the same data in number 3, except that LINE decided to use equity method, what is the carrying value of Investment in BDO as of December 31, 2014? a. P520,000 b. P450,000 c. P570,000 d. P600,000 9. On July 1, 2014, LIMA Inc., a small and medium enterprise, acquired 30,000 ordinary shares out of 100,000 ordinary shares of PKI, a non-public entity whose stocks are not traded in the stock market. The purchase price is P10/share and LIMA paid P20,000 transaction costs. LIMA complies with PFRS for SMEs in preparing its financial statements. LIMA does not want to employ equity method for its investment in associate and selected the alternative. PKI reported P1,000,000 net income and declared P200,000 cash dividends during 2014. The cost of selling the investment as of this date is P20,000. What is the initial amount recognized by LIMA Inc. for its investment in PKI on January 1, 2014? a. P300,000 b. P320,000 c. P280,000 d. P350,000 10. Using the same data in number 9, what is the total income to be recognized by LINE Inc. from its investment in PKI for the year ended December 31, 2014? a. P60,000 b. P300,000 c. zero d. P240,000 11. Using the same data in number 9, what is the carrying value of Investment in PKI as of December 31, 2014? a. P300,000 b. P320,000 c. P560,000 d. P540,000 12. The following income and expense accounts are obtained from the trial balance of MIZ Inc, a small and medium enterprise which decides to adopt PFRS for SMEs, as of December 31, 2014: Unrealized holding gain from Financial Asset at Fair Value Through OCI Increase in Revaluation surplus Actuarial gain from defined benefit plan Translation gain/credit from foreign operation Increase/gain in fair value of hedging instrument Unrealized holding gain from derivative classified as cash flow hedge

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P1,000,000 2,000,000 3,000,000 4,000,000 5,000,000 6,000,000

Unrealized holding loss on FLFVPL due to credit risk 7,000,000 How much is the total other comprehensive income that can be presented by MIZ Inc. upon complying with PFRS for SMEs? a. P16,000,000

b. P13,000,000

c. P12,000,000

d. P14,000,000

13. Using the same data in number 12, how much among the following items can be presented as an alternative in the profit or loss by MIZ upon complying with PFRS for SMEs? a. P3,000,000

b. P4,000,000

c. P5,000,000

d. P6,000,000

14. On July 1, 2014, GRILL Inc., a small and medium enterprise, purchased a building classified as property, plant and equipment for P2,300,000 with a residual value of P300,000 and useful life of 10 years. GRILL prepares its financial statements in compliance with PFRS for SMEs. The qualified appraiser determined the fair value/sound value of the building at P3,000,000 as of December 31, 2014. What is the carrying value of the building to be presented in GRILL’s Statement of Financial Position as of December 31, 2014 upon compliance with PFRS for SMEs? a. P3,000,000

b. P1,900,000

c. P2,100,000

d. P2,200,000

15. Using the same data in number 14, what is the revaluation surplus as of December 31, 2014 to be presented in GRILL’s December 31, 2014 Statement of Financial Position? a. P800,000

b. P720,000

c. P640,000

d. none

16. CHAIN Inc, a small and medium enterprise, is preparing its December 31, 2014 financial statements in compliance with PFRS for SMEs. The inventory data as of December 31, 2014 are provided below: TYPE S4 S3 TAB

COST P5M P8M P10M

Estimated Selling Price P7,000,000 P10,000,000 P15,000,000

Gross Profit P1,000,000 P1,000,000 P3,000,000

Estimated Cost to Complete P500,000 P300,000 P4,000,000

Estimated Cost to Sell P1,000,000 P 200,000 P4,000,000

What is the amount to be presented as carrying value of inventory as of December 31, 2014 upon compliance with PFRS for SMEs? a. P23,000,000

b. P22,000,000

c. P20,000,000

d. P17,000,000

17. WAY Inc., a small and medium enterprise, incurred the following research and development cost during 2015: Research cost 10,000,000 Development cost before technological feasibility 20,000,000 Development cost after technological feasibility 40,000,000 What is the amount that shall be expensed as incurred for 2015 upon compliance with PFRS for SMEs?

CURRENT COST ACCOUNTING 1. WWW had the following transactions for the current year with respect to its inventory:  On January 1, the entity purchased 50,000 units at P100 per unit.  During the year, the entity sold 40,000 units at P180 per unit.  The entity paid P700,000 for operating expenses.  The current replacement cost of the inventory on December 31 is P150 per unit. What is the realized holding gain on inventory for 2010? What is the unrealized holding gain on inventory for 2010? What is the cost of sales to be reported under current cost accounting? 2. Details of UUU’s property, plant and equipment on December 31,2010 are: Year acquired Percent depreciated Historical cost Current cost 2008 30 1,000,000 1,400,000 2009 20 300,000 380,000 2010 10 400,000 440,000 UUU calculated depreciation at 10% straight line. A full year’s depreciation is charged in the year of acquisition. There were no disposals of property. In the statement of financial position restated to current cost, what should be reported as net current cost of the property, plant and equipment? a. P1,160,000 c. P1,680,000 b. P1,300,000 d. P1,820,000

3. On January 1, 2015, AXA Inc. acquired a land at a cost of P1,000,000. On December 31, 2015, the current replacement cost of the land is P1,500,000. On December 31, 2016, the current replacement cost of the land is P1,800,000 and AXA Inc. sold the land for P2,000,000. What is the unrealized holding gain on land for 2015? What is the realized holding gain on land for 2016? What is the gain on sale/disposal of land for 2016?

4. 3. On January 1, 2015, AXA Inc. acquired a building at a cost of P2,000,000 with no residual value and useful life of 10 years. On December 31, 2015, the current replacement cost of the land is P3,000,000. What is the unrealized holding gain on building for 2015? What is the realized holding gain on building for 2015? What is the depreciation expense to be reported under current cost accounting?

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HYPERINFLATIONARY FINANCIAL STATEMENTS 1. Indicate whether the item is a monetary or non-monetary item: __Cash and Cash Equivalents __Loans and receivables __Held for Trading Bonds Receivables __Held to Maturity Bonds Receivables __Investments in Shares of Stocks __Property, Plant and Equipment __Inventory __Investment Property __Prepaid asset __Intangible asset __Deferred tax asset __Accounts payable __Income tax payable __Deferred tax liability __Interest payable __Unearned revenue __Accrued expenses __Notes payable __Loans payable 2. The following assets are acquired on January 1, 2015 when the general price index is 200: Inventory P1,000,000 Property, plant and equipment 2,000,000 Investment in Bonds Receivable 3,000,000 The company is reporting in a hyperinflationary economy. On December 31, 2015, the general price index is 300. How shall the assets above be presented in the 12/31/2015 Statement of Financial Position? 3. The statement of financial position of ART Inc. before translation to hyperinflationary economy is presented as follows: Cash 1,000,000 Accounts payable 1,000,000 Accounts receivable 2,000,000 Unearned revenue (1/1/2015) 1,500,000 Inventory (1/1/2015) 3,000,000 Ordinary share (1/1/2015) 2,000,000 PPE (7/1/2015) 4,000,000 Retained earnings 500,000 The general price index are provided for the following dates: 1/1/2015 – 100 7/1/2015 – 200 12/31/2015 – 300 How much retained earnings shall be presented in the translated statement of financial position of ART Inc. in a hyperinflationary economy? 4. The following data are provided from the financial statement of WWE Inc. which is reporting in a hyperinflationary economy: Historical cost Net Monetary Asset 1/1/2015 1,000,000 Sales 2,000,000 Cost of sales (1,500,000) Operating expenses (200,000) Dividends declared (10/1/2015) (100,000) Net Monetary Asset 12/31/2015 1,200,000 The general price index are provided for the following dates: 1/1/2015 – 100 10/1/2015 – 200 12/31/2015 – 400 Average during 2015 - 300 What is the net purchasing power gain/(loss) for year 2015?

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