Rey Joyce B.

Abuel June 25, 2018

AEC 11 ACB

Problem 2-9

Going concern 1. The operations of a saving bank are being evaluated by the
Bangko Sentral ng Pilipinas.

During the investigation, the BSP has determined that numerous

loans made by top management were unwise and have seriously
endangered the future of the saving bank.

Accounting entity 2. The parent entity in Manila has a subsidiary in Japan. The financial
statements of the subsidiary are translated to pesos for consolidation
with the financial statements of the parent entity at year-end.

Monetary unit 3. A machinery was imported from USA at a certain cost five years
ago. Because of inflation, the machinery has now a current
replacement cost which is very much higher than the historical cost.

Management would like to report the machinery at current

replacement cost.

Time period 4. An entity has experienced a drastic reduction in revenue by reason

of a long dry spell in the area where the entity grows its tobacco.

The management decided to wait until next year and present

financial statements for a two-year period rather than prepare now
the traditional twelve-month financial statements.

Accounting entity 5. A subsidiary was exhibiting poor financial statements for the
current year.

In an effort to increase the subsidiary’s reported income, the parent

entity purchased goods from subsidiary at twice the normal markup.
Problem 2-10

Time period 1. An entity decided to publish financial statements only in the years
when it had good news to report.

Going concern 2. An entity reported inventory, property, plant and equipment and
intangible assets at current value at year-end.

Accounting entity 3. An electronics entity owned by a proprietor reported the cost of the
proprietor’s swimming pool as an asset of the entity.

Monetary unit 4. An entity prepared financial statements adjusted for changes in

purchasing power.

Time period 5. A mining entity kept no accounting records after starting business.
The entity is waiting until the mine is exhausted to determine the
success or failure of business.

Problem 2-11

Monetary unit 1. An entity reported financial statements in nominal pesos that have
mixed rather than uniform amount of purchasing power.

Time period 2. A multinational entity published a complete set of financial

statements at least once a year, regardless of whether the financial
results were good or bad.

Monetary unit 3. The pesos of today can buy as much goods and services as the
five pesos five years ago.

Going concern 4. An accounting entity is viewed as continuing in operation in the

absence of evidence to the contrary.

Accounting entity 5. An accounting practitioner mixed personal accounting records with

the records of the accounting practice.