Republic of the Philippines

CAMARINES NORTE STATE COLLEGE

F. Pimentel Avenue, Brgy. 2, Daet, Camarines Norte – 4600, Philippines

Understanding Financial Statements

Objectives:

1. Prepare a classified statement of financial position and a statement of comprehensive income.

2. Discuss how a statement of financial position is interrelated with the statement of comprehensive
income.

Discussion:

This material seeks to determine how well students understand the two basic financial statements discussed in
their previous accounting subject. It is a form of review exercises to familiarize students with the topic at hand.
It is being undertaken to equip students with knowledge in preparation for the topic Financial Statement
Analysis.

Exercise 1.

The following items were extracted from the adjusted trial balance of YMV Co. as at December 31, 2019: (in
pesos)

Cash 320,000
Land 900,000
Accounts payable 120,000
Equipment 400,000
Notes payable, 6 months 150,000
Sales 800,000
Accounts receivable 110,000
Selling expense 200,000
Loan Payable (3 years to maturity) 500,000
Cost of goods sold 350,000
Service vehicle 650,000
Prepaid Insurance 30,000
Retained earnings, January 1, 2019 964,500
General and administrative expense 205,000
Merchandise inventory, January 1, 2019 180,000
Accumulated depreciation- equipment 150,000
Accumulated depreciation-service vehicle 130,000
Allowance for doubtful accounts 5,500
Accrued expense 45,000
Patent 500,000
Share capital, 9,500 ordinary shares @P100 par 950,000

No dividends were declared during the year. Merchandise inventory as at December 31, 2019 amounted to P
P150,000

Required:
1. Prepare a classified statement of financial position as at December 31, 2019, showing the current
and non-current distinction of assets and liabilities.
2. Prepare a statement of comprehensive income for the year ended December 31, 2019.
3. State how the statement of financial position and the statement of comprehensive income are
interrelated.
 Republic of the Philippines
CAMARINES NORTE STATE COLLEGE
F. Pimentel Avenue, Brgy. 2, Daet, Camarines Norte – 4600, Philippines

Exercise 2.

The BB Company collected the following data which pertains to its operation for the year 2019 from the file of
its accounting office destroyed by fire:

a. Sales returns and allowances P40,000

b. Selling expenses P120,000
c. Cost of goods sold is estimated at 40% of net sales.
d. General and administrative expenses account for 70% of the total operating expenses, but only 10% of
gross sales.
e. Sales discounts P10,000
f. Income tax rate 30 percent

Required:
Based on the above information, construct a statement of comprehensive income.

Exercise 3.

The CC Company showed the following information for 2019:

Current assets, January 1 P1,240,000

Non-current assets, December 31 5,720,000
Non-current liabilities, December 31 1,800,000
Share capital, January 1 2,500,000
Retained earnings, January 1 1,450,000
Current Liabilities, January 1 750,000

For the year 2019, the company realized a net income of P1,580,000 and declared dividends amounting to
P1,200,000. No change occurred to the share capital account, and it was noted that the current liabilities
decreased by 20 percent during the year.

Required:
Based on the above information, construct a statement of financial position.