Name: Xenona Dyne F.

Del Rosario Date: September 25,

2020 Grade and Section: CBET-01-101P

Assignment Chapter 1

11. Two business proprietors approached you for a loan. Maamo has a travel agency with assets
worth P500,000 and liabilities of P200,000. Maganda has a beauty parlor with assets worth P400,000
and liabilities of P200,000. Both businesses are doing well and earning P100,000. They plan to borrow
P300,000 and put up a branch. You will need to know:

A. How much is each net worth? The higher the net worth, the more business is

solvent. The net worth of Maamo is ₱300,000

Maganda’s net worth is ₱200,00

Therefore, Maamo has the higher net worth

B. Is the business profitable? Compute for return on equity: net income/ net worth x 100. Compute
for return on asset: net income divided by assets x 100.

=Yes

ROE= (Maamo= 33.33%, Maganda= 50%)

ROA= (Maamo= 20%, Maganda= 25%)

C. Who is more solvent? Who is more profitable?

=Maganda is more solvent and profitable

D. Decide whom to lend.

= Of course, the one who’s more profitable and that is MAGANDA

12. Gary, a businessman, plans to sell his Rent A Car Agency and go to abroad to join his family. He
offers to sell his business to a friend, Willy. The assets amount to P1,500,000 one-third of which was
borrowed from the bank and is still outstanding. Willy wants to know what will be a fair price for Gary’s
business. He has only P750,000 and thinks that it may not be enough. You agreed to help her and ask
for Gary’s statement of Financial Position.

The assets include accounts due from clients P150,000 whose whereabouts Gally could not for certain
know anymore except for one customer who owes P50,000. Repair equipment is another asset listed in
the statement as P500,000 which was bought 10 years ago but is currently half its cost price. Given this
information, what will be the revised total assets of the business and what will be its net worth to the
owner? Will the money of Willy be sufficient to buy the business of Gary?

Use the following as a guide:

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 Reported net worth (assets less liabilities) ₱1,000,000

Less: Worthless receivables ₱150,000- ₱50,000

Decrease in value of equipment ₱250,000

Revised net worth at its current market value ₱650,000

Can Willy afford to pay? Compare the revised net worth with the money Willy has. The statement of
Financial Position is discussed intensively in Chapter 3,4, and 8.

= Yes, willy can afford to buy because his assets are worth ₱750,000 meanwhile the revised net
worth is only ₱650,000

13. Continue with the Doria illustration, refer to page 16. The following transactions took place for the
month of July. Sales amounted to P52,000. Paper and ink were purchased and paid for P20,000. Total
Supplies available amounted to P32,000, half of these were used up. Monthly rent was again paid.
Power and water were paid but it increased by P2,000 Doria made a P3,000 cash withdrawal. She paid
her UCPB Loan for P50,000.

Statement of Income (well-produced for July):

Sales ₱ 52,000

Rent ( 5,000 )

Power and Water ( 5,000 )

Supplies Used (16,000)

Profit for July ₱26,000

Statement of Changes in Equity for July:

Doria, Capital July 1 ₱232,000

Add Profit 26,000

Less Drawings (3,000 )

Doria, Capital July 31 ₱255,000

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 Statement of Cash Flows for July:

Cash receipts from customers ₱52,000

Cash paid to UCPB (50,000)

Cash paid to Doria (3,000)

Cash for supplies bought (20,000)

Cash paid for rent (5,000)

Cash paid for power and water (5,000)

Cash increase during July ₱31,000

Add Cash Balance June 30 70,000

Cash Balance July 31 ₱39,000

Statement of Financial Position (wealth accumulated) as at July 31

Cash ₱39,000

Supplies 16,000

Copying Equipment _ 350,000

Total Assets ₱405,000

Loan Payable ₱150,000

Doria, Capital
255,00

Total Liabilities & Owner’s Equity ₱405,000

15. Mr. Siojo opened an internet shop on October 1 with a cash investment of P150,000. After
three moths of operation, the following activities were given to you for study:

Cash Receive from customers P205,000

Cash Borrowed from the banks 150,000

Siojo’s cash withdrawal 15,000

Utilities, salaries, supplies, and rent paid 115,000

Cash paid of the bank 50,000

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 Cash purchase for equipment 100,000

Cash purchase for furniture 25,000

The policy of the store is: No credit allowed. Likewise, all expenses are paid in cash.

Required: follow the Doria format of no. 13 and

a.) Compute for the profit or loss after 3 months of operation.

Statement of Income (well produced for July)
Sales ₱205,000
Utilities, Salaries, and Rent paid (115,000)
₱90,000

b. Prepare a statement of changes in equity for the 3-month

period. Statement of changes in Equity for December

OCTOBER

Doria Capital, July 1 ₱150,000

Add Profit 90,000

Less Drawings (15,000)

Doria, Capital December 31 ₱225,000

c. Compute for the cash flows for 3 months ending December.

Statement of Cash flow from October to December 31

Cash Receipts from customers ₱205,00

0
Cash paid to Siojo (15,000)

Cash Paid for Utilities, Salaries and rent paid (115,00)

Cash paid for the bank (50,000)

Cash paid for the equipment (100,000)

Cash paid for furniture (25,000)

Cash Increased during October to December ₱100,00

0
Add Cash Balance 300,000

Cash Balance October to December ₱200,000

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 d. Prepare a statement of Financial Position as at December
31. Statement of Financial Position
Cash ₱100,000
Equipment 225,000
Furniture 25,000
₱325,000

Loans Payable ₱100,000

Doria Capital, December 31 225,000
Total of Liabilities and Equity ₱325,000

16. The cash balance of Waterfront Hotel on December 31of the previous year was P750,000 for
2019, the finance manager made the following forecasts:

a.) Total revenues will amount to P1,200,000 but P200,000 will be uncollected.

b.) Total expenses will amount to P550,000 but P150,000 will be unpaid.

c.) Business Loans will be paid P300,000

d.) Owner’s personal drawing will amount to P100,000.

e.) New equipment will be acquired and paid in cash for P175,000

The forecast for cash is that this will decrease because of the loan payment and new equipment
acquisition. Is the finance manager, right?

Use the following as a guide:

Cash Inflows from Sales Revenues ₱1,000,000

Less Cash Outflows for: Expenses paid 400,000

Owner’s cash drawing 100,000

Payment of loans 300,000

Acquisitions of equipment 175,000 (975,000)

Net Cash Inflow (or outflow) during the month ₱25,000

Add: Cash balance December 31, 2018 ₱750,000

Cash Balance December 31, 2019 ₱775,000

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