FINANCIAL STATEMENTS

PROBLEM #1

Answer Problem # 1 based on the given data.

The amounts of (a) the assets and liabilities of Val Financial Consultants at December 31, 20X4
and (b) the revenue and expenses of the company for the year ended on that date follow. The
items are listed in alphabetical order.

Accounts Payable 18,000 Notes Payable 46,500

Accounts Receivable 4,500 Property Tax Expense 3,000
Building 84,000 Rent Expense 21,000
Cash 10,500 Salary Expense 57,000
Equipment 31,500 Service Revenue 162,000
Interest Expense 6,000 Supplies 10,500
Interest Payable 1,500 Utilities Expense 4,500
Land 12,000

The capital balance of Val Santos, the owner, was P64,500 at December 31, 20X3. During 20X4,
Val withdrew P48,000 for personal use.

Instructions:

1. Prepare the income statement of Val Financial Consultants for the year ended
December 31, 20X4.
2. Prepare the company’s statement of owner’s equity for the year ended December 31,
20X4.
3. Prepare the company’s balance sheet at December 31, 20X4.
4. Answer these questions about the company:
4.1 Was the result of operations for the year a profit or a loss? How much?
4.2 Did Val drain off all the earnings for the year, or did he increase the company’s
capital during the period? How much in total economic resources does the
company have as it moves into the new year? How much does the company
owe? What is the amount of Val’s equity interest at the end of the year?