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Chapter 38

Presentation of Financial Statements

PROBLEM 38-1: TRUE OR FALSE


1. FALSE 6. FALSE
2. FALSE 7. TRUE
3. TRUE 8. TRUE
4. FALSE 9. TRUE
5. TRUE 10. FALSE

PROBLEM 38-2: TRUE OR FALSE


1. TRUE 6. FALSE
2. TRUE 7. FALSE
3. FALSE 8. TRUE
4. TRUE 9. FALSE
5. FALSE 10. FALSE

PROBLEM 38-3: MULTIPLE CHOICE – THEORY


1. D 6. D 11. B 16. C 21. C
2. C 7. B 12. B 17. C 22. B
3. D 8. B 13. D 18. A 23. D
4. C 9. D 14. A 19. D 24. D
5. C 10. A 15. B 20. B 25. D

PROBLEM 38-4: MULTIPLE CHOICE – THEORY


1. B 6. C
2. D 7. C
3. B 8. D
4. D 9. C
5. D 10. D

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PROBLEM 38-5: MULTIPLE CHOICE – THEORY
1. D 6. D
2. A 7. E
3. C 8. D
4. D 9. A
5. A 10. C

PROBLEM 38-6: THEORY & COMPUTATIONAL

1. A

2. A

3. A

4. C

5. C

6. C

7. C

8. C

9. A

10. C

11. D

12. D

13. B

14. D

15. D

16. D

17. D

18. B

19. D

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20. B

21. Solutions:

Requirement (a):
Morning Co.
Statement of financial position
As of December 31, 20x1
ASSETS Notes
Current assets:
Cash and cash equivalents 6 ₱1,060,000
Trade and other receivables 7 1,770,000
Inventories 1,200,000
Held for trading securities 800,000
Total current assets 4,830,000

Noncurrent assets:
Investment in FVOCI securities 300,000
Investment property 900,000
Property, plant and equipment 8 4,900,000
Total noncurrent assets 6,100,000

TOTAL ASSETS ₱10,930,000

LIABILITIES AND EQUITY


Current liabilities:
Trade and other payables 9 ₱1,140,000
Income tax payable 500,000
Provisions 430,000
Total current liabilities 2,070,000

Noncurrent liabilities:
Loans payable - net 10 2,260,000
Deferred tax liability 300,000
Total noncurrent liabilities 2,560,000

TOTAL LIABILTIES 4,630,000

Equity:
Ordinary share capital 4,000,000

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Share premium 600,000
Retained earnings 1,640,000
Other components of equity 11 60,000
TOTAL EQUITY 6,300,000

TOTAL LIABILITIES & EQUITY ₱10,930,000

Requirement (b):

Note 6: Cash and cash equivalents


This line item consists of the following:
Cash on hand 60,000
Cash in bank 1,000,000
Cash and cash equivalents 1,060,000

Note 7: Trade and other receivables


This line item consists of the following:
Accounts receivable 2,000,000
Allowance for doubtful accounts (300,000)
Advances to employees 40,000
Advances to suppliers 30,000
Trade and other receivables 1,770,000

Note 8: Property, plant and equipment


This line item consists of the following:
Land 2,200,000
Building 3,400,000
Accumulated depreciation - Bldg. (700,000)
Property, plant and equipment 4,900,000

Note 9: Trade and other payables


This line item consists of the following:
Accounts payable 720,000
Accrued liabilities 80,000
Interest payable 340,000
Trade and other payables 1,140,000

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Note 10: Loans payable - net
This line item consists of the following:
Loans payable 3,000,000
Discount on loan payable (740,000)
Loans payable - net 2,260,000

Note 11: Other components of equity


This line item consists of the following:
Revaluation surplus 90,000
Translation loss on foreign operation (30,000)
Other components of equity 60,000

22. Solutions:

Requirement (a):
Lunch Co.
Statement of profit or loss and other comprehensive income
For the year ended December 31, 20x1

Notes
Sales 22,000,000
Cost of goods sold 12 (6,000,000)
Gross profit 16,000,000
Distribution costs 13 (2,230,000)
Administrative expenses 14 (3,050,000)
Impairment loss on financial assets (190,000)
Finance costs (340,000)
Profit before tax 10,190,000
Income tax expense (2,000,000)
Profit for the year 8,190,000
Other comprehensive income
Items that will not be reclassified subsequently:
Investments in equity instruments 200,000
Items that may be reclassified subsequently to profit or loss:
Cash flow hedges 30,000
Other comprehensive income for the yr., net of tax 230,000

TOTAL COMPREHENSIVE INCOME FOR THE YR. 8,420,000

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Requirement (b):

Note 12: Cost of goods sold


This line item consists of the following:

Beginning inventory 1,700,000


Purchases 5,600,000
Purchase returns (500,000)
Freight in 400,000
Total goods available for sale 7,200,000
Ending inventory (1,200,000)
Cost of goods sold 6,000,000

Note 13: Distribution costs


This line item consists of the following:
Salaries of sales personnel 670,000
Advertising expense 320,000
Rent expense (280,000 x ½) 140,000
Commission expense 1,100,000
Distribution costs 2,230,000

Note 14: Administrative expenses


This line item consists of the following:

Research and development expense 180,000


Directors' remuneration 2,000,000
Salaries of administrative personnel 520,000
Rent expense 140,000
Depreciation expense 160,000
Insurance expense 50,000
Administrative expenses 3,050,000

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PROBLEM 38-7: MULTIPLE CHOICE – COMPUTATIONAL
1. C
Solution:
Cash 70,000
Accounts receivable (120,000 - 26,000) 94,000
Inventories [60,000 + (26,000 / 130%)] 80,000
Total current assets 244,000

2. A
Solution:
Accounts payable 15,000
Bonds payable, due 20x4 25,000
Discount on bonds payable, due 20x4 (3,000)
Dividends payable 1/31/x4 8,000
Total current liabilities 45,000

3. B
Solution:
Earnings from long-term contracts 6,680,000
Costs and expenses (5,180,000)
Profit before tax 1,500,000
Income tax expense (1,500,000 x 30%) (450,000)
Profit after tax 1,050,000
Retained earnings - unappropriated (Jan. 1) 900,000
Retained earnings - restricted for note payable (Jan. 1) 160,000
Total retained earnings (Dec. 31) 2,110,000

4. A – Note payable - noncurrent

5. C
Solution:
The year-end adjustment to record income tax expense is as follows:
Dec. Income tax expense (see solution above) 450,000
31,
Prepaid taxes 450,000
20x3

Cash 600,000
Accounts receivable, net 3,500,000
Cost in excess of billings on longterm contracts 1,600,000
Prepaid taxes -
Total current assets 5,700,000

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6. A
Solution:
Unadjusted net assets 875,000
Treasury share of Mont erroneously included in assets (24,000)
Adjusted net assets 851,000

7. D 25,000 gross of tax – 10,000 tax effect = 15,000 net of tax


reclassification adjustment

8. A - Reclassification adjustment of cumulative unrealized gains


(losses) on FVOCI securities is prohibited. The cumulative
unrealized gains (losses) on FVOCI securities are transferred
directly in equity when the FVOCI securities are derecognized.

9. A
Solution:
Actuarial gain or loss on defined benefit plan (6,000)
Unrealized gain on FVOCI securities 30,000
Reclassification adjustment for cumulative gain on
translation of foreign operation included in profit or loss (5,000)
Profit for the year 154,000
Total comprehensive income 173,000

10. C
Solution:
Unadjusted bal. of advertising expense 146,000
Prepaid advertising (15,000)
Accrued advertising 9,000
Adjusted advertising expense 140,000

11. A
Solution:
Contribution to youth and educational programs 250,000
Contribution to health and human-service organizations 140,000
Contribution shouldered by employees (80,000)
Charitable contributions expense 310,000

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12. A
Solution:
Finished goods
Jan. 1 400,000
COGM (squeeze) 200,000 240,000 Cost of sales
360,000 Dec. 31

13. A 600,000 total credit in trial balance – 420,000 total debit =


180,000 profit before tax x 70% net of income tax rate = 126,000
profit after tax

14. A
Solution:
Advertising 150,000
Freight-out 80,000
Rent for office space (220,000 x 1/2) 110,000
Sales salaries and commissions 140,000
Total selling expenses 480,000

15. A
Solution:
Accounting and legal fees 25,000
Officers’ salaries 150,000
Insurance 85,000
Total general and administrative expenses 260,000

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PROBLEM 38-8: EXERCISES – COMPUTATIONAL

1. Solutions:

Requirement (a):
Evening Co.
Statement of financial position
As of December 31, 20x1

ASSETS Notes
Current assets:
Cash and cash equivalents 6 1,100,000
Trade and other receivables 7 1,770,000
Inventories 200,000
Total current assets 3,070,000

Noncurrent assets:
Biological assets 1,200,000
Investment property 900,000
Property, plant and equipment 8 4,400,000
Intangible assets 9 560,000
Other noncurrent assets 10 800,000
Total noncurrent assets 7,860,000

TOTAL ASSETS 10,930,000

LIABILITIES AND EQUITY


Current liabilities:
Trade and other payables 11 920,000
Loans payable - net 12 1,760,000
Provisions 430,000
Total current liabilities 3,110,000

Noncurrent liabilities:
Net defined benefit liability 13 1,700,000
Total noncurrent liabilities 1,700,000

TOTAL LIABILTIES 4,810,000

10
Equity:
Ordinary share capital 4,000,000
Share premium 14 970,000
Retained earnings 15 1,220,000
Other components of equity 30,000
Treasury shares (100,000)
TOTAL EQUITY 6,120,000

TOTAL LIABILITIES & EQUITY 10,930,000

Requirement (b):

Note 6: Cash and cash equivalents


This line item consists of the following:
Cash on hand 120,000
Cash in bank 980,000
Cash and cash equivalents 1,100,000

Note 7: Trade and other receivables


This line item consists of the following:
Accounts receivable 2,000,000
Allowance for doubtful accounts (300,000)
Advances to employees 40,000
Advances to suppliers 30,000
Trade and other receivables 1,770,000

Note 8: Property, plant and equipment


This line item consists of the following:
Land 1,200,000
Building 4,800,000
Accumulated depreciation - Bldg. (1,600,000)
Property, plant and equipment 4,400,000

Note 9: Intangible assets


This line item consists of the following:
Patent 440,000
Accumulated amortization - Patent (80,000)

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Web site costs 250,000
Accumulated amortization - Web site (50,000)
Intangible assets 560,000

Note 10: Other noncurrent assets


This line item consists of the following:
Advances to officers 130,000
Advances to affiliates 670,000
Other noncurrent assets 800,000

Note 11: Trade and other payables


This line item consists of the following:
Accounts payable 720,000
Utilities payable 80,000
Deposit liability for returnable containers 120,000
Trade and other payables 920,000

Note 12: Loans payable - net


This line item consists of the following:
Loans payable 2,500,000
Discount on loan payable (740,000)
Loans payable - net 1,760,000

Note 13: Net defined benefit liability


This line item consists of the following:
Present value of defined benefit obligation 2,700,000
Fair value of plan assets (1,000,000)
Net defined benefit liability 1,700,000

Note 14: Share premium


This line item consists of the following:
Share premium 600,000
Share premium - Share warrants outstanding 300,000
Share premium - Treasury shares 70,000
Share premium 970,000

Note 14: Retained earnings


This line item consists of the following:
Retained earnings 1,030,000
Reserves for contingencies 190,000

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Retained earnings 1,220,000

2. Solutions:

Requirement (a):

Dinner Co.
Statement of profit or loss and other comprehensive income
For the year ended December 31, 20x1
Notes
Sales 16,800,000
Cost of goods sold 12 (8,390,000)
Gross profit 8,410,000
Distribution costs 13 (3,090,000)
Administrative expenses 14 (2,910,000)
Impairment of property, plant and equipment (290,000)
Finance costs (280,000)
Profit before tax 1,840,000
Income tax expense (552,000)
Profit for the year 1,288,000
Other comprehensive income
Items that will not be reclassified subsequently:
Revaluation decrease during the period (120,000)
Items that may be reclassified subsequently to profit or loss:
Translation gain on foreign operation 25,000
Other comprehensive income for the yr., net of tax (95,000)

TOTAL COMPREHENSIVE INCOME FOR THE YR. 1,193,000

Requirement (b):

Note 12: Cost of goods sold


This line item consists of the following:

Beginning inventory 2,100,000


Purchases 6,800,000
Purchase returns (480,000)
Freight in 350,000
Total goods available for sale 8,770,000
Ending inventory (380,000)
Cost of goods sold 8,390,000

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Note 13: Distribution costs
This line item consists of the following:

Freight out 870,000


Sales commissions 480,000
Marketing expense 320,000
Salaries of sales personnel 670,000
Rent expense 210,000
Depreciation expense 540,000
Distribution costs 3,090,000

Note 14: Administrative expenses


This line item consists of the following:

Salaries of administrative personnel 2,520,000


Rent expense 210,000
Depreciation expense 180,000
Administrative expenses 2,910,000

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PROBLEM 38-9: CLASSROOM ACTIVITIES – COMPUTATIONAL

1. Solutions:

Requirement (a):
FRIENDSHIPS CO.
STATEMENT OF FINANCIAL POSITION
AS OF DECEMBER 31, 20X1

ASSETS Notes
Current assets:
Cash and cash equivalents 4 4,240,975
Trade and other receivables 5 9,033,111
Inventories 6 22,117,615
Held for trading securities 2,834,079
Prepaid income tax 234,125
Prepaid supplies 890,239
Total current assets 39,350,144

Noncurrent assets:
Loans receivable - net 7 8,592,522
Investment in FVOCI securities 987,234
Investment in associate 1,290,347
Property, plant and equipment 8 12,370,960
Deferred tax asset 1,092,387
Total noncurrent assets 24,333,450

TOTAL ASSETS 63,683,594

LIABILITIES AND EQUITY


Current liabilities:
Trade and other payables 9 10,302,733
Loans payable - net 10 7,253,748
Income tax payable 721,346
Provision for warranty obligations 432,187
Total current liabilities 18,710,014

Noncurrent liabilities:
Deferred tax liability 918,732
Deferred credits 712,788
Total noncurrent liabilities 1,631,520

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TOTAL LIABILTIES 20,341,534

Equity:
Ordinary share capital 20,000,000
Share premium 6,000,000
Retained earnings 11 16,344,664
Other components of equity 12 997,396
TOTAL EQUITY 43,342,060

TOTAL LIABILITIES & EQUITY 63,683,594

Requirement (b):

Note 4: Cash and cash equivalents


This line item consists of the following:

Cash on hand 62,350


Cash in bank - BPI (Savings) 1,720,500
Cash in bank - BPI (Current) 1,890,234
Cash in bank - BDO (Current) 567,891
Cash and cash equivalents 4,240,975

Note 5: Trade and other receivables


This line item consists of the following:

Accounts receivable 8,341,689


Allowance for doubtful accounts (347,182)
Advances to employees 57,610
Advances to suppliers 34,981
Interest receivable (due on Mar. 1, 20x2) 946,013
Trade and other receivables 9,033,111

Note 6: Inventories
This line item consists of the following:

Raw materials inventory 1,237,398


Work in process inventory 7,987,908
Finished goods inventory 12,892,309
Inventories 22,117,615

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Note 7: Loans receivable - net
This line item consists of the following:

Loans receivable 9,827,341


Unearned interest income (1,234,819)
Loans receivable - net 8,592,522

Note 8: Property, plant and equipment


This line item consists of the following:

Land 8,980,751
Building 3,419,877
Accumulated depreciation - Bldg. (712,930)
Equipment 917,387
Accumulated depreciation - Equipt. (234,125)
Property, plant and equipment 12,370,960

Note 9: Trade and other payables


This line item consists of the following:

Accounts payable 9,071,239


Accrued liabilities 889,712
Interest payable 341,782
Trade and other payables 10,302,733

Note 10: Loans payable - net


This line item consists of the following:

Loans payable 8,000,000


Discount on loan payable (746,252)
Loans payable - net 7,253,748

Note 11: Retained earnings


This line item consists of the following:

Retained earnings - unrestricted 15,144,664


Retained earnings - appropriated 1,200,000
Retained earnings 16,344,664

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Note 12: Other components of equity
This line item consists of the following:

Revaluation surplus 873,984


Unrealized gains on FVOCI 123,412
Other components of equity 997,396

2. Solutions:

Requirement (a):

(a) Inventory – end. 386,000


{370,000 + [320K x (370K/7.4M)]}
Income summary 386,000
(b) Loss on inventory write-down 116,000
(386,000 – 270,000)
Inventory – end. 116,000
(c) Bad debts expense 50,000
Allowance for bad debts 50,000

Allowance for bad debts


280,000 beg.
Write-offs 120,000 28,000 Recoveries
50,000 Bad debts
end. (4.76M x 5%) 238,000

(d) Loss on reclassification (1M – 800K) 200,000


Held for trading securities 200,000
(d) Held for trading securities 180,000
Unrealized gain (980K – 800K) 180,000
(e) Income tax expense 1,572,000
Income tax payable 1,572,000

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Requirement (b):

Best Friends Co.


Statement of profit or loss and other comprehensive income
For the year ended December 31, 20x1
Sales 22,800,000
Cost of sales (9,664,000)
Gross profit 13,136,000
Distribution costs (1,470,000)
Administrative expenses (6,400,000)
Gain on impairment recovery of property, plant and equipment 720,000
Loss on inventory write-down (116,000)
Bad debts expense (50,000)
Reclassification of financial asset (200,000)
Unrealized gains on financial assets 180,000
Finance costs (560,000)
Profit before tax 5,240,000
Income tax expense (1,572,000)
Profit for the year 3,668,000
Other comprehensive income:
Items that will not be reclassified subsequently:
Revaluation increase during the period 130,000
Items that may be reclassified subsequently to profit or loss: -
Other comprehensive income for the year, net of tax 130,000

TOTAL COMPREHENSIVE INCOME FOR THE YR. 3,798,000

3. Solutions:

Requirement (a):

(a) Investment in bonds (950K – 800K) 150,000


Gain on derecognition of 150,000
financial asset
(b) Unrealized loss [2.8M – (2.640M – 140M)] 300,000
Biological assets 300,000
(c) Investment in associate 46,000
Dividend income 90,000
Sh. in the profit of associate 100,000
(1M x 30% x 4/12)
Sh. in revaluation increase 36,000
(120,000 x 30%)

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(d) Retirement benefits expense 588,000
(336K + 252K)
Remeasurements to the net defined 252,000
benefit liability (asset)
Defined benefit cost 840,000
(e) Income tax expense 1,104,600
Income tax payable 1,104,600

Requirement (b):
Buddies Co.
Statement of profit or loss and other comprehensive income
For the year ended December 31, 20x1

Revenue from service fees 12,000,000


Contract costs (4,000,000)
Employee benefits (3,000,000)
Advertising expense (680,000)
Gain on derecognition of financial asset measured at cost 150,000
Unrealized losses on biological assets (300,000)
Share in profit of associate 100,000
Retirement benefits expense (588,000)
Profit before tax 3,682,000
Income tax expense (1,104,600)
Profit for the year 2,577,400
Other comprehensive income:
Items that will not be reclassified subsequently:
Share in revaluation increase of associate 36,000
Remeasurements to net defined benefit liability (asset) (252,000)
Items that may be reclassified subsequently to profit or loss: -
Other comprehensive income for the year, net of tax (216,000)

TOTAL COMPREHENSIVE INCOME FOR THE YR. 2,361,400

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4. Solutions:

Requirement (a):

(a) No entry
(DIT and OC are bank reconciling items;
not book)

(The money market placements will be


included in ‘Cash and cash equivalents’)

(b) No entry

(c) Inventory 200,000


Accounts payable 200,000
(d) Investment property (2.9M – 2.8M) 100,000
Unrealized gain 100,000
(e) Depreciation expense – Bldg. 405,000(1)
Accumulated depreciation – Bldg. 405,000
(1)
Double declining balance rate = (450K ÷ 4.5M) = 10%
Depreciation, 20x1 = (4.5M – 450K) x 10% = 405,000

(f) Depreciation – Equipment 320,000(2)


Accumulated depreciation – Equipt. 320,000
(2)
Using trial and error, the depreciation method used for the equipment is the
SYD method.

Proof:
SYD denominator = 5 x [(5+1) ÷ 2] = 15
Depreciation, 20x0 = (1.4M – 200K) x 5/15 = 400,000
Depreciation, 20x1 = (1.4M – 200K) x 4/15 = 320,000

(g) Amortization expense 30,000(3)


Accumulated amortization 30,000
(3)
Estimated useful life = 17 yrs.
Remaining legal life = 20 yrs. – 5 yrs. = 15 yrs. (shorter)
Amortization expense = 900,000 ÷ 15 x 6/12 = 30,000

(h) Inventory 108,000(4)


Interest expense 108,000
(4)
The borrowing costs eligible for capitalization are computed as follows:
(1.8M ÷ 2) x 12% = 108,000

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(i) Discount on bonds payable 932,392
(8M – 7,067,608)
Cash 932,392
to correct the initial recording of the bond
issue

(5)
The issue price of the bonds is computed as follows:
Cash flows PVF PV
P: 8,000,000 PV of 1 @14%, n=4 0.59208 4,736,640
i: 800,000 PV ord. annuity @14%, n=4 2.91371 2,330,968
7,067,608

(i) Interest expense 189,465


Discount on bonds payable 189,465
to amortize the discount on bonds payable

(6)
Partial amortization table:
Date Payments Int. expense Amort. Present value
1/1/x1 7,067,608
12/31/x1 800,000 989,465 189,465 7,257,073

The balance of the “interest payable” on the trial balance is tested for its

Face amount Nominal rate Interest payable


Note payable 2,000,000 12% 240,000
Bonds payable 8,000,000 10% 800,000
Required balance 1,040,000
Carrying amount 1,040,000
Adjustment -

The adjusted “interest expense” is computed as follows:


Effective int. Interest
Present value rate expense
Notes payable 2,000,000 12% 240,000
Capitalizable b. costs (h) (108,000)
Total 132,000

Bonds payable 7,067,608 14% 989,465

Adj. interest expense 1,121,465

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(j) Utilities expense 360,000
Accrued liabilities 360,000

(k) Income tax expense 719,861


Current tax asset 719,861

Requirement (b):

COLLEAGUES CO.
STATEMENT OF FINANCIAL POSITION
AS OF DECEMBER 31, 20X1

ASSETS Notes
Current assets:
Cash and cash equivalents 4 6,017,608
Trade and other receivables 5 2,980,000
Inventories 2,608,000
Current tax asset 30,140
Total current assets 11,635,748

Noncurrent assets:
Investment in FVOCI securities 1,600,000
Investment property 2,900,000
Property, plant and equipment 6 5,925,000
Intangible assets 7 870,000
Other noncurrent assets 8 1,660,000
Total noncurrent assets 12,955,000

TOTAL ASSETS 24,590,748

LIABILITIES AND EQUITY


Current liabilities:
Trade and other payables 9 2,850,000
Current portion of loans payable - net 10 400,000
Total current liabilities 3,250,000

Noncurrent liabilities:
Noncurrent portion of loans payable - net 11 1,600,000
Bonds payable - net 12 7,257,073

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Total noncurrent liabilities 8,857,073

TOTAL LIABILTIES 12,107,073

Equity:
Ordinary share capital 6,000,000
Retained earnings (1) 6,223,675
Other components of equity 260,000
TOTAL EQUITY 12,483,675

TOTAL LIABILITIES & EQUITY 24,590,748

(1)
Ret. earnings unadjusted bal. 4.544M + adjusted profit after tax 1,679,675
= 6,223,675

Requirement (c):

COLLEAGUES CO.
STATEMENT OF PROFIT OR LOSS
FOR THE YEAR ENDED DECEMBER 31, 20X1
NOTES
Sales 16,800,000
Cost of sales (7,200,000)
Gross profit 9,600,000
Distribution costs 13 (2,424,000)
Administrative expenses 14 (3,755,000)
Finance costs (1,121,465)
Unrealized gain on investment property 100,000
Profit before tax 2,399,535
Income tax expense (719,861)
Profit for the year 1,679,675

COLLEAGUES CO.
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED DECEMBER 31, 20X1
NOTES
Profit for the year 1,679,675
Other comprehensive income:
Items that will not be reclassified subsequently:
Investment in equity securities 260,000
Items that may be reclassified subsequently to profit or loss: -

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Other comprehensive income for the year, net of tax 260,000

TOTAL COMPREHENSIVE INCOME FOR THE YR. 1,939,675

Requirement (d):

Note 4: Cash and cash equivalents


This line item consists of the following:

Cash on hand 450,000


Cash in bank 3,867,608
Money market placements 1,700,000
Cash and cash equivalents 6,017,608

Note 5: Trade and other receivables


This line item consists of the following:

Accounts receivable 3,900,000


Allowance for bad debts (920,000)
Trade and other receivables 2,980,000

Note 6: Property, plant and equipment


This line item consists of the following:

Land 1,600,000
Building 4,500,000
Accumulated depreciation - Bldg. (855,000)
Equipment 1,400,000
Accumulated depreciation - Equipt. (720,000)
Property, plant and equipment 5,925,000

Note 7: Intangible assets


This line item consists of the following:

Patent 900,000
Accumulated amortization (30,000)
Intangible assets 870,000

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Note 8: Other noncurrent assets
This line item consists of the following:

Cash surrender value 860,000


Bond sinking fund 800,000
Other noncurrent assets 1,660,000

Note 9: Trade and other payables


This line item consists of the following:

Accounts payable (890K + 200K adj.) 1,090,000


Interest payable 1,040,000
Accrued liabilities (360K + 360K adj.) 720,000
Trade and other payables 2,850,000

Note 10: Loans payable


This line item consists of the following:

Current portion (2M x 1/5) 400,000


Non-current portion (2M x 4/5) 1,600,000
Total loans payable 2,000,000

Note 11: Bonds payable - net


This line item consists of the following:

Bonds payable 8,000,000


Discount on bonds payable (742,927)
Bonds payable - net 7,257,073

Note 12: Distribution costs


This line item consists of the following:

Freight out 870,000


Sales commissions 504,000
Salaries of sales personnel 870,000
Utilities expense (360K x 1/2) 180,000
Distribution costs 2,424,000

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Note 13: Administrative expenses
This line item consists of the following:

Salaries of administrative personnel 2,820,000


Depreciation expense - Bldg. 405,000
Depreciation expense - Equipt. 320,000
Amortization expense 30,000
Utilities expense (360K x 1/2) 180,000
Administrative expenses 3,755,000

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