Problem Solving:

1. Selected information from the accounting records of A2 Company is as follows:

Net sales for 2022 P 900,000

Cost of goods sold for 2022 600,000
Inventory at December 31,2021 180,000
Inventory at December 31,2022 156,000

REQUIRED: Compute for the following:

a. Inventory turnover for 2022
b. Average age of Inventory
c. Gross profit

2. The current assets of B3 Enterprise consist of cash, accounts receivable, and inventory. The
following information is available:

Credit Sales 75% of total sales

Inventory turnover 5 times
Working capital P 1,120,000
Current ratio 2:1
Quick Ratio 1.25:1
Average Collection Period 42 days
Working days 360

Compute for the estimated inventory amount.

3. Selected data from C4 Company’s year end financial statements are presented below. The
difference between average and ending inventory is immaterial.

Current ratio 2.0

Quick ratio 1.5
Current Labilities P 120,000
Inventory turnover (based on cost of sales) 8 times
Gross profit margin 40%

Compute for C4’s net sales for the year.

4. Selected information from the accounting records of the D5 Company is as follows:

Net A/R at December 31,2021 P 900,000

Net A/R at December 31,2022 1,000,000
Accounts Receivable turnover 5 to 1
Inventories at December 31,2021 1,100,000

Inventories at December 31,2022 1,200,000

Inventory turnover 4 to 1

What was the gross margin for 2022?

5. E6 Co. has a price earnings ratio of 10, earnings per share of P 2.20, and a pay out ratio of
75%. The dividend yield is?
 6. The times interest earned ratio of F7 Company is 4.5 times. The interest expense for the year
was P 20,000, and the company’s tax rate is 40%. What is the net income?

7. G8 Corporation’s stockholder’s equity at December 31,2022 consists of the following:

6% cumulative preferred stock, P100 par,

liquidating value was P 110 per share; issued and outstanding 50,000 shares P 5,000,000
Common stock, par, P5 per share; issued and outstanding, 400,000 shares 2,000,000
Retained Earnings 1,000,000

At December 31,2022 G8 Corporation’s book value per share was?

8. H9 Company had the following financial statistics for 2022:

Long-term debt (average rate of interest is 8%) P 400,000

Interest expense 35,000
Net income 48,000
Income tax 46,000
Operating income 107,000

What was the times-interest earned for 2022?

9. J10 Corporation had net income of P 200,000 and paid dividends to common stockholders of P
40,000 in 2022. The weighted average number of shares outstanding in 2022 was 50, 000
shares. Cherry Corporation’s common stock is selling for P 60 per share in the local stock
exchange.
REQUIRED: Compute for the following:
a. Price-earnings ratio
b. Dividend payout ratio.

10.

JYP ENTERTAINMENT
COMPARATIVE INCOME STATEMENT
FOR THE YEARS ENDED DECEMBER 31,2021 AND 2022
2022 2021
Sales P 10,000,000 P 7,500,000
Less Cost of Goods Sold 6,500,000 4,500,000
Gross Margin 3,500,000 3,000,000
Less Operating expenses 2,630,000 2,280,000
Net operating income 870,000 720,000
Less interest expenses 120,000 120,000
Net income before taxes 750,000 600,000
Less income taxes (30%) 225,000 180,000
Net income P 525,000 P 420,000

REQUIRED: Prepare a common size income statement for 2022 and 2021 using vertical analysis.