Problem from Intermediate Accounting 3 by Millan (2020)
PROBLEM 1: TRUE OR FALSE
1. F PAS 1 does not require an entity to make an explicit statement of compliance with PFRS because it is
required to make an explicit and unreserved statement of such compliance.
2. F PAS 1 allows a departure from PFRS requirement in some instances and if the relevant regulatory
framework requires and permits such departure
3. T The feature materiality and aggregation of financial statements supports this claim. Each material class
of similar items is presented separately and individually immaterial items are aggregated with other
items.
4. F PAS 1 does not only encourages but requires an entity to present comparative information in respect of
the preceding period for all amounts reported in the current period’s financial statements.
5. T Current liabilities are typically settled using current assets and in some instance, create other cureent
liabilities.
6. T Accounts receivable is presented on the balance sheet as current assets, unless there is evidence to
contrary such as it cannot be realized within 12 months and not held primarily for trading.
7. T Investments in held for trading securities are always presented as current assets, even though it is not
realizable within 12 months because those were held for trading.
8. F Investments in equity securities measured at FVOCI are classified as noncurrent in the absence of
evidence to the contrary.
9. T Investment in associate, together with investment property, PPE and goodwill, are noncurrent items.
10. F Investment property is real estate property purchased with the intention of earning a return on the
investment either through rental income, the future resale of the property, or both. Thus, presented as
non-current asset.
PROBLEM 5: MULTIPLE CHOICE - THEORY
1. D To provide information about the financial position, financial performance, and cash flows of an entity
that is useful to a wide range of users in making economic decisions is the primary objective of
financial statements.
2. C Complete set of financial statements includes notes together with balance sheet, statement of
comprehensive income, of changes in equity, and of cash flow, and additional balance sheet if
required.
3. C Additional balance sheet applies accounting policies retrospectively, makes retrospective restatemet
and reclassification adjustments. And not prospective application.
4. B One of the general features of financial statements is consistency of and not comparability of
presentation.
5. B Inappropriate accounting policies cannot be rectified by mere disclosure.
6. D If there are changes in the frequency of reporting for financial statements, the entity shall only
disclose the period covered of such statements, the reason for using longer or shorter period and the
fact that amounts presented are not entirely comparable.
7. A Classified presentation shall be used except when an unclassified presentation provides information
that is reliable and more relevant.
8. B Deferred tax assets and deferred tax liabilities are presented as noncurrent irrespective of their
expected reversal dates.
9. B PAS 1 does not prescribe the order or format of presenting items in the balance sheet because any
entity may modify their presentation to suit the nature of the entity and its transactions.
10. A PAS 1 does not prescribe the basis for presentation of general purpose financial statements.
11. D The objective of general purpose financial statements provide information about the financial
position, financial performance, and cash flows of an entity excluding valuation.
12. C The general features listed in PAS 1 excludes accounting entity and comparability.
13. C A fair presentation does not require an entity to have its financial statements examined by an external
party.
14. A Measuring assets net of valuation allowances is not ofsetting.
15. C PFRSs apply only to financial statements, and not necessarily to other information presented in an
annual report, a regulatory filing, or another document.
PROBLEM 6: MULTIPLE CHOICE - COMPUTATIONAL
1. Cash P 70,000
Accounts Receivable
Trade Accounts P 96,000
Allowances for uncollectible accounts ( 2,000) 94,000
Inventory
Inventory 60,000
Cost of unsold goods sent on
consignment (26,000/130%) 20,000 80,000
P 244,000 C
2. Accounts Payable P 15,000
Bonds payable, due 20x4 25,000
Discount on bonds payable, due 20x4 (3,000)
Dividends Payable 1/31/x4 8,000
Total current liabilities P 45,000 A
3. Retained Earnings - unappropriated P 900,000
Retained Earnings - restricted for note payable 160,000
Earnings from long-term contracts 6,680,000
Cost and expenses (5,180,000)
Income tax expense (450,000)
Total Retained Earnings P 2,110,000 B
4. Note Payable - noncurrent P 1,620,000 A
5. Cash P 600,000
Accounts Receivable, net 3,500,000
Cost in excess of billings on long-term contracts 1,600,000
Total current assets P 5,700,000 C
6. Net assets P 875,000
Treasury share of Mont, Inc. at cost 24,000
Adjusted Net assets, Dec 31, 20x3 P 851,000 A
