BAFACR4X
Intermediate Accounting III
August 18, 2020
PROBLEM SET
Classification of Liabilities and Accounts Payable
Problem 1.1 CLASSIFICATION OF LIABILITIES
Vacation Company reports the following items on December 31, 2020.
Trade accounts payable, net of debit balance of P20,000 on suppliers’ accounts 250,000
Trade accounts receivable, net of credit balance of P30,000 on customers’ accounts 470,000
10% Bonds payable maturing in 10 equal annual instalments of P300,000 3,000,000
Warranty Obligation 45,000
Deferred Revenues 85,000
Share Dividends Payable 240,000
Payroll Withholdings Payable 63,000
Lease Liability 670,000
Accrued Expenses 58,000
12% Bonds Payable with covenants breached, creditor agreed to give a 13-month grace
1,250,000
period one week before the release of financial statements on April 6, 2021
Discount on the 12% bonds payable 187,000
Five-year 15% note issued on October 1, 2016 with interest payable every September 30 400,000
Deferred Tax Liability 112,000
Current Tax Liability 12,000
Contingent Liability 50,000
Mortgage payable with a current portion of P200,000 1,000,000
Other Provisions 43,000
BDO checking account, net of the BPI overdraft of P40,000 360,000
Long-term note maturing on February 28, 2021, Vacation has the unconditional right to
500,000
defer settlement by nine months
1. How much is the total current liabilities?
2. How much is the total non-current liabilities?
Problem 1.2 CLASSIFICATION OF LIABILITIES
Time Company has provided the following information on December 31, 2020.
Debit balance in customers’ accounts 220,000
Credit balance in customers’ accounts 20,000
Debit balance in suppliers’ accounts 30,000
Credit balance in suppliers’ accounts 190,000
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BAFACR4X
Intermediate Accounting III
August 18, 2020
PROBLEM SET
Classification of Liabilities and Accounts Payable
Income Taxes withheld from employees 127,000
Dividends Payable 85,000
Contested BIR tax assessment – possible obligation 150,000
Long-term bonds maturing on November 21, 2020 600,000
12% Serial bonds payable in semiannual instalments of P500,000 every April 1 and October
5,000,000
1, with last instalment on October 1, 2026. Interest is paid semiannually on the same dates.
Estimated payments on damages caused to nearby structures due to fire incident of factory
400,000
building
Accrued Revenues 45,000
Accrued Expenses 60,000
Deferred Revenues 40,000
Prepaid Expenses 25,000
Customer’s Deposit 30,000
1. How much is the total current liabilities?
2. How much is the total non-current liabilities?
Problem 1.3 LONG-TERM LIABILITIES
Violet Company had the following long-term notes and bonds as of December 31, 2020. Its 2020 financial
statements are released on March 16, 2021.
Four-year serial bond payable in semiannual instalments every June 30 and December 31 2,400,000
Four-year term bond maturing on May 1, 2021 600,000
Five-year note maturing on August 16, 2021, creditor agreed to refinance the note for
400,000
another six months on January 4, 2021
Three-year note maturing on February 15, 2020, the creditor has the unconditional right to
300,000
defer settlement for at least 12 months
Three-year loan with covenants breached, lender has agreed on December 29, 2020 to
700,000
provide a grace period of ten months for the payment of the loan
1. How much is the total current liabilities?
2. How much is the total non-current liabilities?
2
BAFACR4X
Intermediate Accounting III
August 18, 2020
PROBLEM SET
Classification of Liabilities and Accounts Payable
Problem 1.4 ACCOUNTS PAYABLE – PURCHASE DISCOUNT
The following transactions were completed by Jefferson Corporation during December 2019:
Dec 16 Purchased merchandise from Intel Company, P66,000, terms 2/10, n/30; FOB Shipping point. Intel
Company paid freight of P1,400.
Dec 19 Received goods from Celeron Corporation, P72,000; terms: 3/10, 2/15, n/30.
Dec 26 Paid the account with Intel Company in full.
Dec 31 Paid the account with Celeron Corporation in full.
1. Record the foregoing transactions in the books of Jefferson Corporation using the
a. Gross method of recording purchases
b. Net method of recording purchases
2. Give the necessary adjustment on December 31 assuming Jefferson uses the net method and the account with
Celeron is still unpaid as of December 31.
Problem 1.5 ACCOUNTS PAYABLE
The balance in Adams Company’s accounts payable on December 31, 2018 was P1,500,000 before considering
the following information:
Goods shipped FOB Shipping point on December 20, 2018 from a vendor to Adams were lost in transit.
Adams did not record the invoice cost of P240,000. On January 6, 2019, Adams filed a P240,000 claim
against the common carrier.
On December 27, 2018, a vendor authorized Adams to return, for full credit, goods shipped and billed
at P80,000 on December 2, 2018. Adams shipped the returned goods on December 27, 2018. A credit
memo for P80,000 was received and recorded by Adams on January 6, 2019.
What amount should Adams Company report as total accounts payable as of December 31, 2018?
Problem 1.6 ACCOUNTS PAYABLE
Washington Company’s accounts payable on December 31, 2018 totaled P1,000,000 before any necessary year-
end adjustments relating to the following transactions and information:
On December 27, 2018, Washington wrote and issued checks to creditors totaling P350,000. The issuance
of the checks was recorded on January 3, 2019.
On December 28, 2018, Washington purchased and received goods for P150,000, terms: 2/10, n/30.
Washington records purchases and accounts payable at net amounts. The invoice was recorded and
paid January 3, 2019.
Goods shipped on December 20, 2018 from a vendor to Washington under terms FOB Destination were
received on January 2, 2019. The invoice cost was P65,000. The purchase was recorded on January 2,
2019.
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BAFACR4X
Intermediate Accounting III
August 18, 2020
PROBLEM SET
Classification of Liabilities and Accounts Payable
Goods costing P120,000 were purchased from NYC Trading. The goods were shipped on December 28,
2018, terms: FOB Shipping point. On January 4, 2019, Washington received the goods together with the
invoice.
The accounts payable general ledger balance of P1,000,000 is net of P80,000 debit balance in one
supplier’s account representing deposit on goods to be delivered in February 2019.
What amount should Washington Company report as total accounts payable as of December 31, 2018?
