CPA REVIEW SCHOOL OF THE PHILIPPINES

Manila
FINANCIAL ACCOUNTING AND REPORTING VALIX/VALIX/SANTOS
MAY 2025 LECPA BATCH 97

STATEMENT OF FINANCIAL POSITION

1. An entity provided the following trial balance on December 31, 2025:
Cash overdraft ( 200,000) Property, plant and equipment, net 1,900,000
Accounts receivable, net 700,000 Accounts payable 700,000
Inventory 1,200,000 Share capital 3,000,000
Prepaid expenses 200,000 Share premium 500,000
Land classified as held for sale 2,000,000 Retained earnings 1,600,000
Checks amounting to P600,000 were written to vendors and recorded on December 31, 2025 resulting in
cash overdraft of P200,000. The checks were mailed on January 15, 2026. Land classified as held for sale
was sold for cash on January 31, 2026.
I. The total current assets should be reported at P4,050,000.
II. The total current liabilities should be reported at P1,300,000
A. Statements I and II are true
B. Statements I and II are not true
C. Only statement I is true
D. Only statement II is true

2. An entity provided the following trial balance on December 31, 2025 which had been adjusted except for
income tax expense:
Cash 4,600,000
Accounts receivable 2,800,000
Inventory 2,000,000
Property, plant and equipment 10,500,000
Accounts payable 1,800,000
Income tax payable 1,250,000
Deferred tax liability 700,000
Note payable – 10% due June 30, 2026 4,000,000
Share capital 2,500,000
Share premium 3,000,000
Retained earnings, January 1 3,500,000
Net sales and other revenue 15,000,000
Costs and expenses 10,000,000
Income tax expense 1,850,000 _________
31,750,000 31,750,000
The accounts receivable included P1,000,000 due from a customer and payable in quarterly installments
of P125,000. The last payment is due December 30, 2027. During the year, estimated tax payment of
P600,000 was charged to income tax expense. The income tax rate is 25%.
The 10% note payable was refinanced on a long-term basis on January 31, 2026 before the issuance of
the 2025 financial statements on March 1, 2026.
I. The total current assets should be reported at P8,900,000 on December 31, 2025
II. The total current liabilities should be reported at P7,150,000 on December 31, 2025.
III. The retained earnings should be reported at P7,250,000 on December 31, 2025.
IV. An obligation that matures in one year from the end of reporting period is classified as noncurrent if
it is refinanced on a long-term basis on or before the end of reporting period.
A. All statements are true
B. All statements are not true
C. Only statements I and II are true
D. Statements I, III and IV are true

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3. An entity reported the following liabilities on December 31, 2025:

Accounts payable 2,000,000

Short-term borrowings 1,500,000
Bonds payable due December 31, 2026 3,000,000
Discount on bonds payable 500,000
Mortgage payable, current portion P500,000 3,500,000
Bank loan due December 31, 2026 1,000,000
Share dividend payable 2,000,000
Note payable due December 31, 2027 4,000,000
The bank loan was refinanced on a long-term basis on December 31, 2025.
The entity has the right to defer settlement of the note payable for at least twelve months after December
31, 2025.
I. The total current liabilities should be reported at P6,500,000 on December 31, 2025
II. The total noncurrent liabilities should be reported at P8,000,000 on December 31, 2025.
III. An obligation that matures in one year from the end of reporting period is classified as noncurrent
if the entity has the right to defer settlement for at least twelve months after the end of reporting
period.
A. All statements are true
B. All statements are not true
C. Only two statements are true
D. Only one statement is true

4. The end of reporting period of an entity is December 31, 2025 and the financial statements for 2025 are
authorized for issue on March 31, 2026.
• The entity had equity investments held for trading. On December 31, 2025, these investments were
recorded at the fair value of P5,000,000. During the period up to February 15, 2026, there was a steady
decline in the fair value of the shares in the portfolio and on February 15, 2026, the fair value had
fallen to P3,500,000.
• The entity had reported contingent liability on December 31, 2025 related to court case in which the
entity was the defendant. The case was not heard until the first week of February 2026. On March 1,
2026, the judge handed down a decision against the entity and determined that the entity was liable
to pay damages and costs totaling P3,000,000.
• On December 31, 2025 the entity had accounts receivable from a large customer in the amount of
P5,000,000. On March 15, 2026, the entity was advised in writing by the liquidator of the said
customer that the customer was insolvent and that only 20% of the accounts receivable will be paid
on December 31, 2026.
I. The total amount of adjusting events should be reported at P7,000,000 on December 31, 2025.
II. Events after the end of reporting period are favorable or unfavorable events that occur between
the end of the reporting period and the date when the financial statements are authorized for issue.
III. Adjusting events are events that provide evidence of conditions that existed at the end of reporting
period.
A. Statements I, II and III are true
B. Statements I, II and III are not true
C. Only statement I is true
D. Only statements II and III are true
End

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