Diagnostic Examination in Financial Accounting 3

1. The following is a December 31, 2017, post-closing trial balance for the WG Publishing Company.
Account Title Debits Credits
Cash 65,000
Accounts receivable 160,000
Inventories 285,000
Prepaid expenses 148,000
Machinery and equipment 320,000
Accumulated depreciation – equipment 110,000
Investments 140,000
Accounts payable 60,000
Interest payable 20,000
Unearned revenue 80,000
Taxes payable 30,000
Notes payable 200,000
Allowance for uncollectible accounts 16,000
Ordinary Shares 400,000
Retained earnings 202,000
Totals 1,118,000 1,118,000

Additional information:
1.Prepaid expenses include P120,000 paid on December 31, 2017, for a two-year lease on the building
that houses both the administrative offices and the manufacturing facility.

2. Investments include P30,000 in Treasury bills purchased on November 30, 2017. The bills mature on
January 30, 2018. The remaining P110,000 includes investments in Financial Asset at fair value that the
company intends to sell in the next year.

3. Unearned revenue represents customer prepayments for magazine subscriptions. Subscriptions are for
periods of one year or less.

4. The notes payable consists of the following:

a. a P40,000 note due in six months.

b. a P100,000 note due in six years.

c. a P60,000 note due in three annual installments of P20,000 each, with the next installment due August
31, 2018.

5. The ordinary shares account represents 400,000 shares of no par value ordinary shares issued and
outstanding. The corporation has 800,000 shares authorized.

Prepare a classified statement of financial position for the WG Publishing Company at December 31, 2017.
 WG Publishing Company
Statement of Financial Position
For the Year Ended December 31, 2011

ASSETS
Current Assets
Cash and cash equivalents Note 1 P 95,000
Financial asset at Fair value 110,000
Accounts Receivable Note 2 144,000
Inventories 285,000
Prepaid Expenses 88,000
Total current assets P 722,000

Non-Current Assets
Machinery and Equipment Note 3 P 210,000
Other Non-Current Assets 60,000
Total Non-Current Assets 270,000
P 992,000

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current Liabilities
Trade and Other Payables Note 4 P 110,000
Notes payable - Current 60,000
Unearned Revenue 80,000
Total current liabilities P 250,000

Non-Current Liabilities:
Notes payable – non-current 140,000
Total Liabilities P 390,000
Shareholders’ equity:
Ordinary Shares, 800,000 shares authorized, P 400,000
400,000 shares issues and outstanding, no par
value
Retained earnings 202,000
Total shareholders’ equity 602,000
Total liabilities and shareholders’ equity P 992,000

Note 1 Cash and Cash Equivalents Note 3 Machinery and Equipment

Cash P 65,000 Machinery and Equipment P 320,000
Treasury bills 30,000 Less: Acc. Depreciaion - Equipment 110,000
Cash and Cash Equivalents P 95,000 Machinery and Equipment, net P 210,000

Note 2 Accounts Receivable Note 4 Trade and Other Payables

Accounts Receivable P 160,000 Accounts Payable P 60,000
Less: Allow. for Unc. Accounts 16,000 Interest Payable 20,000
Accounts Receivable, net P 144,000 Taxes Payable 30,000
Trade and Other Payables P 110,000