I.

CLASSIFICATION

Financial Statement Account Identification. Mark each of the accounts listed in the following table
as follows:
a. In column (1), indicate in which statement-income statement (IS) or balance sheet (BS)- the account
belongs.
b. In column (2), indicate whether the account is a current asset (CA), current liability (CL), expense (E),
fixed asset (FA), long-term debt (LTD), revenue (R), or stockholders' equity (SE).
(1) (2)
Account Name Statement Type of Account
1 Accounts payable BS CL
2 Accounts receivable BS CA
3 Accruals BS CL
4 Accumulated depreciation BS FA-counter account
5 Administrative expense IS E
6 Building BS FA
7 Cash BS CA
8 Common stock (at par) BS SE
9 Cost of goods sold IS E
10 Depreciation IS E
11 Equipment BS FA
12 General expense IS E
13 Interest expense IS E
14 Inventories BS CA
15 Land BS FA
16 Long-term debts BS LTD
17 Machinery BS FA
18 Marketable securities BS CA
19 Notes payable BS CL
20 Operating expense IS E
Paid-in capital in excess of
21 par BS SE
22 Preferred stock BS SE
23 Preferred stock dividends BS SE
24 Retained earnings BS SE
25 Sales revenue IS R
26 Selling expense IS E
27 Taxes IS E
28 Vehicles BS FA
29 Mortgage Payable BS LTD
30 Concession Revenue IS R
Prepare the following financial statements.

1. FM Company provided the following information for the year 2017:

Sales 15,000,000
Merchandise Inventory, January 1 2,000,000
Merchandise Inventory, December 31 2,000,000
Purchases 7,000,000
Freight (40% applicable to sales) 200,000
Office Salaries 600,000
Sales Salaries 700,000
Office Supplies 150,000
Store Supplies 100,000
Depreciation Expenses:
Building 500,000
Office equipment 300,000
Store equipment 180,000
Sales returns and allowances 150,000
Sales discounts 80,000
Purchase discounts 100,000
Purchase returns and allowances 160,000
Interest income 60,000
Loss from lawsuit 10,500
Interest expense 20,000
Salesmen commission 100,000
The income tax rate is 30%.

Prepare the statement of comprehensive income for the year using function of expense
method.
 FM Company
Statement of Comprehensive Income
For the year ended December 31, 2017

Net Sales (Note 1) 14,770,000.00

Less: Cost of Goods Sold (Note 2) (6,860,000.00)
Gross Profit 7,910,000.00
Add: Other Income
Interest Income 60,000.00
Total Income 7,970,000.00
Less: Expenses
Operating Expenses (Note 3) (2,710,000.00)
Other Expenses (Note 4)P (30,500.00) (2,740,500.00)
Net Profit Before Tax 5,229,500.00
Less: Income Tax Expense (1,568,850.00)
Net Profit After Tax 3,660,650.00
Note 1
Sales 15,000,000.00
Less: Sales returns and allowances (150,000.00)
Sales discounts (80,000.00) (230,000.00)
Net Sales 14,770,000.00

Note 2
Merchandise Inventory, January 1 2,000,000.00
Net Purchases
Purchases 7,000,000.00
Add: Freight In (60% x 200k) 120,000.00
Less: Purchase returns and allowances (160,000.00)
Purchase discounts (100,000.00) 6,860,000.00
Cost of Goods Available for Sale 8,860,000.00
Less: Merchandise Inventory, December 31 (2,000,000.00)
Cost of Goods Sold 6,860,000.00

Note 3
Administrative Expenses
Office Salaries 600,000.00
Office Supplies 150,000.00
Depreciation Expenses:
Building 500,000.00
Office equipment 300,000.00 800,000.00 1,550,000.00
Selling Expenses
Freight Out (40% of 200k) 80,000.00
Sales Salaries 700,000.00
Store Supplies 100,000.00
Depreciation Expense:
Store equipment 180,000.00
Salesmen commission 100,000.00 1,160,000.00
Total Operating Expenses 2,710,000.00

Note 4
Loss from lawsuit 10,500.00
Interest expense 20,000.00
Other Expenses 30,500.00
 2. PETMALU Manufacturing Company provided the following accounts on December 31, 2015:

Accounts payable 198,960

Accounts Receivable 550,000
Accrued payroll, taxes & interest 227,190
Accum. Depreciation - Bldg. 123,600
Accum. Depreciation - Machinery & Equipt. 1,500,000
Allowance for bad debts 17,800
Buildings 609,220
Cash 464,000
Current portion of Long-term debt 39,200
Income tax payable 19,950
Finished goods 346,000
Land 129,800
Machinery & Equipment 2,505,800
Manufacturing supplies 19,500
Marketable securities 164,000
Mortgage payable 535,500
Premium on common stock 51,600
Prepaid expenses 44,000
Raw materials 80,500
Retained earnings 1,599,380
Stockholders' Equity 800,000
Work in Process 200,360

Prepare the statement of financial position as of December 31, 2016.

 PETMALU Manufacturing Company
Statement of Financial Position
As of December 31, 2015

ASSETS
Current Assets
Cash 464,000.00
Accounts Receivable 550,000.00
Less: Allowance for bad debts (17,800.00) 532,200.00
Inventory:
Manufacturing supplies 19,500.00
Raw materials 80,500.00
Work in Process 200,360.00
Finished goods 346,000.00 646,360.00
Prepaid expenses 44,000.00
Marketable securities 164,000.00
Total Current Assets 1,850,560.00

Non-Current Assets
Buildings 609,220.00
Less: Accum. Depreciation - Bldg. (123,600.00) 485,620.00
Machinery & Equipment 2,505,800.00
Less: Accum. Depreciation - Machinery & Equipt. (1,500,000.00) 1,005,800.00
Land 129,800.00
Total Non-Current Assets 1,621,220.00

Total Assets 3,471,780.00

LIABILITIES & SHAREHOLDERS' EQUITY

Current Liabilities
Accounts payable 198,960.00
Accrued payroll, taxes & interest 227,190.00
Current portion of Long-term debt 39,200.00
Income tax payable 19,950.00
Total Current Liabilities 485,300.00

Non-Current Liabilities
Mortgage payable 535,500.00
Total Non-Current Liabilities 535,500.00

Total Liabilities 1,020,800.00

Shareholders' Equity
Stockholders' Equity 800,000.00
Premium on common stock 51,600.00
Retained earnings 1,599,380.00
Total Shareholders' Equity 2,450,980.00

Total Liabilities & Shareholders' Equity 3,471,780.00