Chapter 14

Financial Statements

PROBLEM 14-1: TRUE OR FALSE

1. TRUE
2. TRUE
3. TRUE
4. FALSE
5. FALSE
6. FALSE – statement of profit or loss or income
statement, not statement of comprehensive income
7. FALSE
8. TRUE
9. FALSE
10. TRUE

PROBLEM 14-2: MULTIPLE CHOICE

1. B
2. D
3. B
4. A
5. C
6. A
7. B
8. D
9. A
10. C

PROBLEM 14-3: FINANCIAL STATEMENT

PRESENTATION

Requirement (a): Comparative Statement of

financial position
 ENTITY A
STATEMENT OF FINANCIAL POSITION
(REGULAR AGENCY FUND)
AS AT DECEMBER 31, 20X2

Note
s 20x2 20x1
ASSETS
Current Assets
Cash and Cash Equivalents 30,000 30,000
115,00
Receivables 1 80,000
0
Inventories 20,000 -
165,00 110,00
Total Current Assets
0 0

Noncurrent Assets
580,00 310,00
Property, Plant and Equipment 2
0 0
580,00 310,00
Total Noncurrent Assets
0 0

745,0 420,00
TOTAL ASSETS
00 0

Current Liabilities
Financial Liabilities 90,000 60,000
Inter-agency Payables 3 - 27,000
Total Current Liabilities 90,000 87,000

90,00
TOTAL LIABILITIES 87,000
0

TOTAL ASSETS less TOTAL 655,00 333,00

LIABILITIES 0 0

NET ASSETS/EQUITY
655,00 333,00
Accumulated Surplus/(Deficit)
0 0
TOTAL NET 655,0 333,00
ASSETS/EQUITY 00 0
This statement should be read in conjunction with the
accompanying notes.

Requirement (b): Comparative Statement of

financial performance

ENTITY A
STATEMENT OF FINANCIAL PERFORMANCE
(REGULAR AGENCY FUND)
FOR THE YEAR ENDED DECEMBER 31, 20X2

Note
s 20x2 20x1
REVENUE
Tax revenue 50,000 40,000
Service and Business
240,000 192,000
Income
TOTAL REVENUE 290,000 232,000

Less: CURRENT OPERATING EXPENSES

Personnel Services 4 400,000 319,000
Maintenance and Other
Operating 5
Expenses 430,000 344,000
Non-cash Expenses 6 55,000 40,000
TOTAL CURRENT
OPERATING 885,000 703,000
EXPENSES

SURPLUS/ (DEFICIT)
(595,00 (471,00
FROM CURRENT
0) 0)
OPERATIONS

Net Financial 1,167,0

Assistance/Subsidy 00 934,000
SURPLUS/ (DEFICIT) FOR 572,00 463,00
THE PERIOD 0 0

This statement should be read in conjunction with the

accompanying notes.

Requirement (c): Comparative Statement of

changes in equity

ENTITY A
STATEMENT OF CHANGES IN NET ASSETS/EQUITY
(REGULAR AGENCY FUND)
FOR THE YEAR ENDED DECEMBER 31, 20X2

Accumulated
Surplus/
(Deficit)
20x2 20x1
333,00 160,00
Balance at January 1 0 0
Add/ (Deduct):
Changes in Net Assets/Equity for
the Calendar Year
572,00 463,00
Surplus/(Deficit) for the period 0 0
Adjustment of net revenue recognized (250,0 (290,0
directly in net assets/equity 00) 00)
655,0 333,0
Balance at December 31 00 00

This statement should be read in conjunction with the

accompanying notes.
Requirement (d): Statement of cash flows

ENTITY A
STATEMENT OF CASH FLOWS
(REGULAR AGENCY FUND)
FOR THE YEAR ENDED DECEMBER 31, 20X2

Cash Flows from Operating Activities

1,050,0
Receipt of Notice of Cash Allocation 00
Collection of Income/Revenues 50,000
Collection of receivables 200,000
1,300,0
Total cash inflows 00
(250,00
Remittance to National Treasury 0)
(250,00
Payment of Personnel Services 0)
Payment for Maintenance & Other Operating (280,00
Expenses 0)
(110,00
Purchases of Inventories 0)
Remittance of Personnel Benefit Contributions (67,000
and Mandatory Deductions )
(43,000
Reversion of unused NCA )
(1,000,0
Total cash outflows 00)
Net Cash Provided by (Used in) Operating 300,00
Activities 0

Cash Flows from Investing Activities

Purchase of Office Equipment (300,00
 0)
Net Cash Provided by (Used in) Operating (300,00
Activities 0)

Cash Flows from Financing Activities -

Increase (Decrease) in Cash and Cash

Equivalents -
Cash and Cash Equivalents, Jan. 1 30,000
Cash and Cash Equivalents, Dec. 31 30,000
This statement should be read in conjunction with the
accompanying notes.

Computations for Statement of cash flows:

 Collection of receivables:

Accounts
receivable
Dec. 31, 20x1 80,000

240,00 200,00 Collectio

Waterworks System Fees 0 0 ns
120,00 Dec. 31,
0 20x2

 Payment for Personnel Services:

Personnel Services 400,000

Less: Withholding taxes (90,000)
Salary deductions for GSIS, PhilHealth
& Pag-IBIG (60,000)
250,00
Payment for Personnel Services 0
 Payment for Maintenance & Other Operating
Expenses (other than purchases of inventories)

20
Water Expenses
,000
60
Electricity Expenses
,000
40
Telephone Expenses
,000
80
Janitorial Expenses
,000
10
Security Expenses
0,000
Total 300,000
Less: Withholding taxes (20,000)
Net cash payment 280,000

 Purchases of Inventories

Office Supplies Inventory

Dec. 31, 20x1 -
Purchases of 150, 130,0 Office Supplies
inventory 000 00 Expense
20,00
0 Dec. 31, 20x2

Accounts Payable
60,00
0 Dec. 31, 20x1
Payments of accounts 120, 150,0
payable 000 00 Purchases
90,00
Dec. 31, 20x2 0

Payments of accounts payable

 120,000

Less: Withholding taxes (10,000)

Cash outflow on Purchases of
Inventories 110,000

 Remittance of Personnel Benefit Contributions and

Mandatory Deductions

Due to GSIS, PhilHealth & Pag-IBIG

7,000 Dec. 31, 20x1
Amount Salary deductions in
remitted 67,000 60,000 20x2
Dec. 31, 20x2 -

 Purchase of Office Equipment

Office
Equipment
340,00
Dec. 31, 20x1 0
320,0
Purchases of equipment 00 -
660,00 Dec. 31,
0 20x2

Purchases of equipment 320,000

Less: Withholding taxes (20,000)

Cash outflow on Purchases of
Equipment 300,000
Requirement (e): Statement of comparison of budget and actual amounts
Requirement (f): Partial Notes to the financial
statements
Note 1: Receivable
This account consists of the following:

20x2 20x1
Accounts Receivable 120,000 80,000
Allowance for Impairment - A/R (5,000) -
115,00 80,00
Net
0 0

Note 2: Property, Plant and Equipment

This account consists of the following:

20x2 20x1
800,0 800,0
Buildings
00 00
660,0 340,0
Office Equipment
00 00
1,460,0 1,140,0
Total Cost
00 00

680,00 650,00
Accumulated Depreciation - Buildings
0 0
Accumulated Depreciation - 200,00 180,00
Equipment 0 0
880,00 830,00
Total Accumulated Depreciation
0 0

580,0 310,0
Property, Plant and Equipment, net
00 00

Note 3: Inter-agency Payables

This account consists of the following:

20x
2 20x1
Due to BIR - 20,000
Due to GSIS - 4,000
Due to Pag-IBIG - 2,000
Due to PhilHealth - 1,000
Inter-agency Payables - 27,000

Note 4: Personnel Services

This account consists of the following:

20x2 20x1
303,0
Salaries and Wages, Regular 380,000
00
16,0
PERA 20,000
00
400,00 319,0
Personnel Services
0 00

Note 5: Maintenance and Other Operating Expenses

This account consists of the following:

20x2 20x1
130,0 104,0
Office Supplies Expense
00 00
20,00 16,00
Water Expenses
0 0
60,00 48,00
Electricity Expenses
0 0
40,00 32,00
Telephone Expenses
0 0
80,00 64,00
Janitorial Expenses
0 0
100,0 80,00
Security Expenses
00 0
Maintenance and Other Operating 430,0 344,
Expenses 00 000

Note 6: Non-cash Expenses

This account consists of the following:

20x2 20x1
Depreciation-Buildings & Other 30,00 24,00
Structures 0 0
Depreciation-Machinery and Equipment 20,00 16,00
 0 0
Impairment Loss – Loans and
5,000
Receivables -
55,00 40,0
Non-cash Expenses
0 00
PROBLEM 14-4: FOR CLASSROOM DISCUSSION
1. B
2. D
3. D
4. C
5. B
6. D – choice (c), a classified statement of financial
position is one that shows distinctions between
current and noncurrent assets and liabilities.

7. C
8. C
9. B
10. D