CHAPTER 10 FINANCIAL STATEMENTS OF SMALL AND MEDIUM-SIZED ENTITIES PROBLEMS 10-1
Brook Corporation Brooks Corporation Statement of Income and Retained Earnings For the Year Ended December 31, 2012 Sales Cost of goods sold Gross profit Operating expenses Profit from operations Interest expense Profit from continuing operations before income tax Income tax expense Profit from continuing operations Discontinued operations, net of income tax of P12,000 Profit Retained earnings, January 1, 2012 Correction of prior period error, net of income tax of P4,800 Cumulative effect of change in accounting policy, net of income tax of P7,200 Dividends declared in 2012 Retained earnings, December 31, 2012
P 400,000 (280,000) P 120,000 (84,000) P 36,000 4,000 P32,000 9,600 P22,400 28,000 P50,400 1,600,000 11,200 (16,800) (12,000) P1,632,800
10-2. SME Company SME Company Statement of Financial Position December 31, 2012 Assets Non-current Assets Property, plant and equipment, net of accumulated depreciation of P1,450,000 Investment property, at fair value Total Non-current Assets Current Assets Cash and cash equivalents Accounts receivable, net of allowance for doubtful receivables of P200,000 Inventory Total Current Assets Total Assets
P2,874,000 2,500,000 P5,374,000 P 230,000 1,700,000 1,180,000 P3,110,000 P8,484,000
Liabilities Non-current Liabilities Long-term debt Environmental provision Total Non-current Liabilities Current Liabilities Trade payables and accrued expenses Dividends payable Current portion of long-term debt Interest accrued on long-term debt Income tax payable
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P1,800,000 281,000 P2,081,000 P 253,000 100,000 500,000 230,000 130,000
Chapter 8 – Errors and their Corrections
10-3
Warranty provision Total Current Liabilities Total Liabilities
400,000 P1,613,000 P3,694,000
Shareholders’ Equity Share Capital Retained Earnings (2,390,000 + 1,000,000 – 100,000) Total Shareholders’ Equity Total Liabilities and Shareholders’ Equity
P1,500,000 3,290,000 P4,790,000 P8,484,000
Company Y Sales Cost of goods sold (2011 as previously reported 435,000) Gross profit Other income – Change in fair value of investment in associate (2011 as previously stated P0) Selling expenses Administrative expenses Profit before income tax Income tax expense (2011 as previously reported P60,000) Profit Retained earnings, January 1 -as previously stated -effect of correction of prior period cost of goods sold -effect of change in accounting policy for investment in associate Retained earnings, December 31
*Revised annual depreciation effective 2012 Cost Accumulated depreciation, 1/1/12 60,000/4 x 2 Carrying value 1/1/12 Remaining revised life (7-2) Revised depreciation Recorded depreciation for 2012 Effect on cost of goods sold Cost of goods sold, before change in estimate Revised cost of goods sold for 2012
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P60,000 30,000 P 30,000 5 years 6,000 P15,000 P( 9,000) 735,000 P724,000
2012 P1,040,000 (724,000)* P 316,000
Restated 2011 P735,000 (500,000) P235,000
50,000 (80,000) (50,000) P236,000 (70,800) P 165,200
20,000 (50,000) (50,000) P155,000 (46,500) P108,500
340,000 (45,500) 14,000 P473,700
P200,000 P308,500
Chapter 8 – Errors and their Corrections
MULTIPLE CHOICE MC1 MC2 MC3 MC4 MC5 MC6 MC7 MC8 MC9 MC10 MC11 MC12 MC13
E C A C A C B B C A C A A
(4,600,000 – 4,500,000) + (4,800,000 – 5,200,000) = - 300,000 net decrease in FV 5,000,000/20 years = 250,000 depreciation Cost: 101,000 Recoverable amounts: 2010: 102,000 – 4,000 = 98,000 (impaired); 2011: 110,000 -4,000 = 106,000 (not impaired) and 2012: 90,000 – 4,000 = 86,000 (impaired) The investment is measured at cost because there is no published price quotation; and is required to be tested for impairment. The investment is impaired at Dec. 31, 2010 (P98,000 being lower than P101,000) and 2012 (86,000 is lower than 101,000).
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