ration was incorporated on Dec. 1, 2021, and began operations one week later. Before closing the books for the fiscal year ended Nov. 30, 2022, the controller prepared the following financial statements: AACA Corporation
PLEASE ANSWER ASAP
Problem No. 1
AACA Corporation was incorporated on Dec. 1, 2021, and began operations one week later. Before closing the books for the fiscal year ended Nov. 30, 2022, the controller prepared the following financial statements:
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AACA Corporation November 30, 2022 |
|
|
Assets |
|
|
Current assets |
|
|
Cash |
P150,000 |
|
Marketable securities, at cost |
60,000 |
|
Accounts receivable |
450,000 |
|
Allowance for doubtful accounts |
( 59,000) |
|
Inventories |
430,000 |
|
Prepaid insurance |
15,000 |
|
Total current assets |
1,046,000 |
|
Property, plant and equipment |
426,000 |
|
Less accumulated depreciation |
( 40,000) |
|
Property, plant and equipment, net |
386,000 |
|
Research and development costs |
120,000 |
|
Total assets |
P1,552,000 |
Liabilities and Shareholders' Equity |
|
|
Current liabilities |
|
|
Accounts payable and accrued expenses |
P 592,000 |
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Income taxes payable |
224,000 |
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Total current liabilities |
816,000 |
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Shareholders' equity |
|
|
Share capital, P10 par value |
400,000 |
|
|
336,000 |
|
Total shareholders' equity |
736,000 |
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Total liabilities and shareholders' equity |
P1,552,000 |
|
|
|
|
AACA Corporation Statement of Income For the Fiscal Year Ended November 30, 2022 |
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Net sales |
P2,950,000 |
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|
|
|
Operating expenses: |
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Cost of sales |
1,670,000 |
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Selling and administrative |
650,000 |
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Depreciation |
40,000 |
|
Research and development |
30,000 |
|
2,390,000 |
|
|
Income before income taxes |
560,000 |
|
Provision for income taxes |
224 000 |
|
Net income |
P 336,000 |
AACA is in the process of negotiating a loan for expansion purposes, and the bank has requested audited financial statements. During the course of the audit, the following additional information was obtained:
- The investment portfolio consists of short-term investments in marketable equity securities with a total fair value of P55,050 as of Nov. 30, 2022.
- Based on an aging of the accounts receivable as of Nov. 30, 2022, it was estimated that P36,000 of the receivables will be uncollectible.
- Inventories at Nov. 30, 2022 did not include work in
process inventory costing P12,000, sent to an outside processor on Nov. 29, 2022. - A P3,000 insurance premium paid on Nov. 30, 2022 on a policy expiring one year later was charged to insurance expense.
- On June 1, 2022, a production machine purchased for P24,000 was charged to repairs and maintenance. AACA depreciates machines of this type on the straight-line method over a five-year life with no salvage value, for financial and tax purposes.
- Research and development costs of P150,000 were incurred the development of a patent, which AACA expects to be granted during the fiscal year ending Nov. 30, 2023. AACA initiated a five-year amortization of the P150,000 total cost during the fiscal year ended Nov. 30, 2022.
- During Dec. 2022, a competitor company filed suit against AACA for patent infringement claiming P200,000 damages. AACA's legal counsel believes that an unfavorable outcome is probable. A reasonable estimate of the court's award to the plaintiff is P72,500.
- The 40% effective tax rate was determined to be appropriate for calculating the provision for income taxes for the fiscal year ended Nov. 30, 2022. Ignore computation of the deferred portion of income taxes.
Based on the given information and the result of your audit, determine the following as of and for the fiscal period ended Nov. 30, 2022 (Input your answers in figures, do not put peso sign, comma, decimals or extra spaces):
- Net income
- Current assets
- Total assets
- Total liabilities
- Total equity
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