PROBLEM 4

Friendships Co.
Statement of Financial Position
December 31, 20x1

Current assets Notes

Cash 4 4,240,975
Trade and other receivables 5 8,998,130
Financial assets at fair value through profit or loss 2,834,079
Inventories 6 22,117,615
Prepayments and other current assets 7 1,159,345 39,350,144

Noncurrent assets
Property and equipment 8 12,370,960
Loans receivable 9 8,592,522
Financial assets at fair value through other comprehensive income 987,234
Investment in associate 1,290,347
Deferred tax asset 1,092,387 24,333,450

Total assets 63,683,594

Current liabilities
Trade and other payables 10 18,269,269
Income tax payable 721,346
Provision for warranty obligations 432,187 19,422,802
Deferred tax liability 918,732
Total liabilities 20,341,534

Shareholders' 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 43,342,060

Total liabilities and shareholders' equity 63,683,594

Friendships Co.
Notes to the Financial Statements (excerpts)
As of and for the Year Ended December 31, 20x1

Note 4 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 4,240,975

Note 5 Accounts receivable - net

Accounts receivable 8,341,689
Less: Allowance for doubtful accounts ( 347,182) 7,994,507
Advances to employees 57,610
Interest receivable 946,013
Trade and other receivables 8,998,130

Note 6 Raw materials inventory 1,237,398

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

Note 7 Prepaid income tax 234,125

Prepaid supplies 890,239
Advances to suppliers 34,981
Prepayments and other current assets 1,159,345

Note 8 Land Building Equipment Total

Cost 8,980,751.00 3,419,877.00 917,387 13,318,015
Less: Accumulated depreciation - ( 712,930.00) ( 234,125) ( 947,055)
Property and equipment, net 8,980,751.00 2,706,947.00 683,262 12,370,960

Note 9 Loans receivable 9,827,341

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

Note 10 Accounts payable 9,071,239

Accrued liabilities 889,712
Loans payable
Loans payable, face amount 8,000,000
Discount on loans payable ( 746,252) 7,253,748
Interest payable 341,782
Deferred credits 712,788
Trade and other payables 18,269,269

Note 11 Retained earnings - unrestricted 15,144,664

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

Note 12 Revaluation surplus 873,984

Unrealized gains on equity securities - FVOCI 123,412
Other components of equity 997,396
1 Mare Co. 3-5. Mint Corp. 6 Mont Inc.
Cash 70,000 3 Earnings from long-term contracts 6,680,000 Net assets, unadjusted 875,000
Accounts receivable Less: Costs and expenses ( 5,180,000) Adjustments:
Trade accounts 96,000 Profit before tax 1,500,000 Treasury share ( 24,000)
Allowance for doubtful accounts ( 2,000) 94,000 Income tax expense (30%) ( 450,000) 851,000
Inventories Profit for the year 1,050,000
Unadjusted 60,000 Add: Retained earnings, unappropriated, beginning of year 900,000
Goods out on consignment Retained earnings, unappropriated, end of year 1,950,000
(P26,000 / 130%) 20,000 80,000 Retained earnings, restricted for note payable 160,000
Current assets 244,000 Retained earnings, December 31, 20x3 2,110,000

2 Mill Co. Adjustment to record income tax expense:

Accounts payable 15,000 Income tax expense 450,000
Bonds payable, due 20x4 Prepaid taxes 450,000
Face amount 25,000
Discount on bonds payable ( 3,000) 22,000 4 Noncurrent liabilities
Dividends payable 8,000 Note payable - noncurrent 1,620,000
Current liabilities 45,000
5 Cash 600,000
Accounts receivable 3,500,000
Cost in excess of billings on long-term contracts - net 900,000
Current assets 5,000,000