Problem 2-1

Easy Company Note 1 - Prepaid expenses

Statement of Financial Position Office supplies 50,000
December 31, 2008 Prepaid rent 150,000
ASSETS Total prepaid expenses 200,000

Current assets: Note Note 2 - Property, plant and equipment

Cash and cash equivalent 800,000 Property, plant and equipment 5,600,000
Accounts receivable 450,000 Accumulated depreciation (1,200,000)
Inventories 900,000 Net book value 4,400,000
Prepaid expenses (1) 200,000
 
Total current assets 2,350,000
 
Noncurrent assets:
Note 3 - Intangible asset
Property, plant and equipment (2) 4,400,000
Patent 800,000
Long-term investments 950,000
  
Intangible asset (3) 800,000
Note 4 - Trade and other payables
Total noncurrent assets 6,150,000
 Accounts payable 350,000
Total assets 8,500,000
Accrued expenses 100,000
Total P450,000
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
Current liabilities:
Trade and other payables (4) 450,000
Note payable, short-term debt 200,000
Total current liabilities 650,000
Noncurrent liabilities:
Mortgage payable, due in 5 years 1,500,000
Note payable, long-term debt 500,000
Total noncurrent liabilities 2,000,000
Shareholders’ equity:
Share capital, P100 par 4,000,000
Share premium 500,000
Problem 2-5
Summa Company Noncurrent liability:
Statement of Financial Position Deferred tax liability 650,000
December 31, 2008
  Equity:
ASSETS Share capital (6) 3,500,000
  Reserves (7) 500,000
Current assets: Note Retained earnings 2,700,000
Cash (1) 700,000 Total equity 6,700,000
Bond sinking fund 2,000,000 Total liabilities and equity 11,400,000
Trade and other receivables (2) 830,000
Inventory 1,200,000
Prepaid expenses 100,000
Total current assets 4,830,000
 
Noncurrent assets:
Property, plant and equipment (3) 5,500,000
Investment property 700,000
Intangible asset (4) 370,000
Total noncurrent assets 6,570,000
Total assets 11,400,000

LIABILITIES AND EQUITY  

Current liabilities: Note

Trade and other payables (5) 2,050,000
Bonds payable due June 30, 2009 2,000,000
Total current liabilities 4,050,000
 
Note 1 - Cash Note 6 – Share capital
  Authorized share capital, 50,000 shares, P100 par 5,000,000
Note 1 – Net sales revenue
Cash on hand 50,000 Unissued share capital (2,000,000)
Gross sales 7,850,000
Cash in bank 650,000 IssuedSales
sharereturns
capital and allowances 3,000,000
( 140,000)
700,000 Subscribed
Salesshare capital, 10,000 shares1,000,000 ( 10,000)
discounts
Note 2 - Trade and other receivables Subscription receivable
Net sales revenue ( 500,000) 7,700,000
500,000
   
Paid in capital 3,500,000
Accounts receivable 650,000   Note 2 – Cost of sales
Allowance for doubtful accounts ( 50,000) Inventory, January 1 1,000,000
Note 7 - Reserves
Purchases 5,250,000
Notes receivable 200,000  
Freight in 500,000
Accrued interest receivable 30,000 Share premium
Purchase returns and allowances 300,000
( 150,000)
Total 830,000 Retained earnings
Purchase appropriated for contingencies
discounts 200,000
( 100,000)
Total Net purchases 5,500,000
500,000
Note 3 - Property, plant and equipment Goods available for sale 6,500,000
  Inventory, December 31 (1,500,000)
Cost of sales 5,000,000
Accum. dep Book value Cost
 
Note 3 – Other income
Land 1,000,000 - 1,000,000 Rental income 250,000
Building 5,500,000 2,500,000 3,000,000 Dividend revenue 150,000
Furniture and equipment2,400,000 900,000 1,500,000 Total other income 400,000
Total 8,900,000 3,400,000 5,500,000 Note 4 – Selling expenses
Freight out 175,000
Salesmen’s commission 650,000
Note 4 - Intangible asset
Depreciation – store equipment 125,000
Patent 370,000 Total selling expenses 950,000
   
Note 5 - Trade and other payables Note 5 – Administrative expenses
Accounts payable 1,000,000 Officers’ salaries 500,000
Notes payable 850,000 Depreciation – office equipment 300,000
Accrued taxes 50,000 Total administrative expenses 800,000
 
Other accrued liabilities 150,000
 Note 6 – Other expenses
Total 2,050,000 Loss on sale of equipment 50,000
Problem 2-6 Loss on sale of investment 50,000
Functional method Total other expenses 100,000
Karla Company
Income Statement
Year ended December 31, 2008
Note
Net sales revenue (1) 7,700,000
Cost of sales (2) (5,000,000)
Gross income 2,700,000
Other income (3) 400,000
Total income 3,100,000
Expenses:
Selling expenses (4) 950,000
Administrative expenses (5) 800,000
Other expenses (6) 100,000 1,850,000
Income before tax 1,250,000
Income tax ( 250,000)
Net income 1,000,000
Natural method
Karla Company
Income Statement
Year ended December 31, 2008
Note
Net sales revenue (1) 7,700,000
Other income (2) 400,000
Total 8,100,000
Expenses:
Increase in inventory (3) ( 500,000)
Net purchases (4) 5,500,000
Freight out 175,000
Salesmen’s commission 650,000
Depreciation (5) 425,000
 Officers’ salaries 500,000
Other expenses (6) 100,000 6,850,000
Income before tax 1,250,000
Income tax ( 250,000)
Net income 1,000,000