FAR-07 Trade & Other Payable
FAR-07 Trade & Other Payable
• At December 31, 2019, Krillin has a P50,000 debit balance in its accounts payable to Vegito, a supplier,
resulting from a P50,000 advance payment for goods to be manufactured to Krillin specifications.
• On December 27, 2019, Krillin wrote and recorded checks to creditors totaling P30,000 that were mailed on
January 10, 2020.
• Checks in the amount of P25,000 were written to vendors and recorded on December 29, 2019. The checks
were dated January 5, 2020.
What amount should Krillin report as accounts payable in its December 31, 2019 statement of financial position?
A. 305,000
B. 280,000
C. 275,000
D. 205,000
2) The balance in Denver Company’s accounts payable account at December 31, 2019 was P1,100,000 before any
adjustments relating to the following:
• Goods were in transit to Denver Company on December 31, 2019. The invoice cost was P150,000, FOB
shipping point on December 29, 2019. The goods were received on January 2, 2020.
• Goods shipped FOB shipping point on December 20, 2019 from a vendor to Denver Company, were lost in
transit. The invoice cost was P100,000. On January 5, 2020, Denver Company filed an P100,000 claim against
the common carrier.
• Goods shipped FOB destination on December 21, 2019, from a vendor to Denver Company, were received on
January 6, 2020. The invoice cost was P195,000.
• On December 28, 2019, Denver Company wrote and recorded checks totaling P70,000 which were mailed on
January 8, 2020.
The amount that Denver Company report as accounts payable on its December 31, 2019 balance sheet is
A. 1,420,000
B. 1,170,000
C. 1,225,000
D. 1,320,000
• The bill for December’s utility cost of P30,000 was received and paid on January 10, 2020.
• A P20,000 advertising bill was received on January 2, 2020. Of the total billing, P15,000 pertain to
advertisements in December 2019 and P5,000 pertain to advertisements in January 2020.
• A lease, effective December 16, 2018, calls for a fixed rent of P100,000 per month, payable one month after the
commencement of the lease and every month after thereafter. In addition, rent equal to 5% of net sales over
P1,000,000 per year is payable on January 31 of the following year.
• Total cash sales and collections on accounts amounted to P1,000,000. Accounts receivable has a net increase
of P200,000. Commissions of 15% of sales are paid on the same day cash is received from customers.
The past experience is that, of the total peso spent for repairs on service contracts, 40% is incurred evenly during the
first contract year and 60% evenly during the second contract year. The entity sold 1,000 contract evenly throughout
2019.
Escrow Liability
13) On the first day of each month, Denise Company received from a customer an escrow deposit of P500,000 for real
estate tax. The entity recorded the P500,000 in escrow account. The customer’s real estate tax is P5,600,000,
payable in equal installments of the first day of each calendar quarter. On January 1, 2019, the balance of the
escrow account was P600,000. On September 30, 2019, what amount should be reported as escrow liability?
A. 2,300,000
B. 1,700,000
C. 900,000
D. 300,000
14) Summer Company maintains escrow accounts for various mortgage entities. The entity collects the receipts and
pays real estate taxes on behalf of mortgage customers. Escrow funds are kept in interest-bearing account.
Interest, less a 10% service fee, is credited to the mortgagee’s account and used to reduce future escrow
payments.
Liability Classification
15) 49ers Company provided the following information on December 31, 2019: