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Excellent Toys INC: Pauline Joy Aguilar Sbac1A
Excellent Toys INC: Pauline Joy Aguilar Sbac1A
TOYS
INC
Financial Reporting and Analysis
(2018)
Kyla Barrameda
SBAC1A
EXCELLENT
TOYS
INC
Financial Reporting and Analysis
(2018)
Czarina Bocaya
SBAC1A
EXCELLENT
TOYS
INC
Financial Reporting and Analysis
(2018)
Lalaine Guevarra
SBAC1A
EXCELLENT
TOYS
INC
Financial Reporting and Analysis
(2018)
Note
Net Sales (10) P 6,922,000.00
Cost of Goods Sold (11) (5,498,000.00)
Gross Income 1,424,000.00
Other Income (12) 5,000.00
Total Income 1,429,000.00
Expenses:
Distribution costs (13) P 618,000.00
Administrative Expenses (14) 285,000.00 903,000.00
Income Before Tax 526,000.00
Income Tax Expense (15) 157,800.00
Net Income P 368,200.00
Note 10 - Net Sales
Gross Sales P 6,950,000.00
Sales Returns and Allowances (10,000.00)
Sales Discounts (18,000.00)
Net Sales P 6,922,000.00
ASSETS
Note
Current Assets:
Cash and Cash Equivalents (4) P 388,900.00
Securities for Trading 300,000.00
Accounts Receivable, net (5) 446,100.00
Inventories (6) 965,000.00
Prepaid Expenses 75,000.00
Total Current Assets P 2,175,000.00
Noncurrent Assets:
Property and Equipment (7) 2,440,000.00
Total Noncurrent Assets 2,440,000.00
Total Assets P 4,615,000.00
Current Liabilities:
Trade and Other Payables (8) P 503,500.00
Other Current Liabilities 38,000.00
Total Current Liabilities P 541,500.00
Noncurrent Liabilities:
Note Payable - Long Term Debt (9) 500,000.00
Total Noncurrent Liabilities 500,000.00
Shareholders' Equity
Share Capital, P20 par 2,500,000.00
Reserves 100,000.00
Retained Earnings 973,500.00
Total Shareholders' Equity 3,573,500.00
Total Liabilities and Shareholders' Equity P 4,615,000.00
Note 4 - Cash and Cash Equivalents
Cash in Bank P 378,900.00
Petty Cash 10,000.00
Total Cash and Cash Equivalents P 388,900.00
Note 6 - Inventories
Finished Goods P 420,000.00
Goods in Process 295,000.00
Raw Materials 250,000.00
Total Inventories P 965,000.00
Accumulated Depreciation:
Machineries and Equipment P 400,000.00
Store Equipments 135,000.00
Office Equipments 75,000.00
Total Accumulated Depreciation P 610,000.00
Notes
Cash Flow from Operating Activities
Cash Receipts From Customers (16) P 6,685,900.00
Gain from Selling of Trading Securities 5,000.00
Cash Payment to Suppliers (17) (5,540,300.00)
Cash Payments for Operating Expenses(18) (819,400.00)
Sale and Purchased of Trading Securities(19) (150,000.00)
Interest Paid on Borrowings (108,000.00)
Tax Payment (20) (141,300.00)
Net Cash Flows from Operating Activities P (68,100.00)
Excellent toys inc. is engaged in the manufacture of the children's toys. The toys are made from
recycled fabric and wood craps. Because of this, the toys are well-received in the European
markets where environmental protection is of prime importance. Majority of the members of the
company's board of directors are known in the business sector.
The accompanying financial statements have been prepared in compliance with Philippine
Financial Reporting Standards (PFRS). PFRS are based on International Financial Reporting
Standards issued by the International Accounting Standards Board. PFRS consist of PFRS,
Philippine Accounting Standards (PAS) and Philippine Interpretations issued by the Financial
Reporting Standards Council (FRSC).
The financial statements of the company have been prepared on historical basis of Accounting.
The preparation of the financial statements in accordance with PFRS requires managements to
make judgment, estimets, abd assumptions that affect the application of accounting policies and
the amounts of assets, liabilities, income and expenses reported in the financial statements at the
reporting date. However, uncertainty about these judgments, estimates and assumptions could
result in an outcome that could require a material adjustment to the carrying amount of the affected
asset or liability in the future.
Judgments, estimates and assumptions are continually evaluated and are based on historical
experience and other factors, including expectations of the future events that are believed to be
reasonable under the circumstances. Revisions are recognized in the period in which the
judgments, estimates and assumptions are revised and in any future period affected.
The key estimates and assumptions used in the consolidated financial statements are based upon
management's evaluation of relevant facts and circumstances as of the date of the financial
statements. Actual results could differ from such estimates.
Note 3 - Significant Accounting Policies
The significant accounting policies that have been adopted by the company are summarized below.
PAS 1 (IAS 1), Presentation of Financial Statements
PAS 2 (IAS 2), Inventories
PAS 7 (IAS 7), Statement of Cash Flows
PAS 8 (IAS 8), Accounting Policies, Changes in Accounting Estimates and Errors
PAS 10 (IAS 10), Events After The Reporting Period
PAS 12 (IAS 12), Income Taxes
PAS 16 (IAS 16), Property, Plant and Equipment
PAS 18 (IAS 18), Revenue
PAS 23 (IAS 23), Borrowing Costs
PAS 36 (IAS 36), Iimpairment of Assets
PAS 37 (IAS 37), Provisions, Contingent Liabilities and Contingent Assets
PFRS 16 (IAS 17), Leases
Note 4 - Cash and Cash Equivalents
Cash is valued at face amount, which includes cash in bank and petty cash fund.
2018 2017
Cash in Bank P 378,900.00 P 197,000.00
Petty Cash 10,000.00 10,000.00
Total Cash and Cash Equivalents P 388,900.00 P 207,000.00
Sales are made on the basis of normal credit terms, and the receivables do not bear
interest. It is presented at net realizable value.
2,018.00 2,017.00
Accounts Recevable P 456,100.00 P 220,000.00
Allowance for Doubtful Accounts (10,000.00) (8,000.00)
Net Realizable Value P 446,100.00 P 212,000.00
One of the big customers' premises were razed by big fire. This customer has an
outstanding balance of P100,000 as of December 31, 2018. The customer may be able
to pay only P25,000. P75,000 is doubtful in this customer's account balance.
Note 6 - Inventories
Inventories are valued at the lower of cost or realizable value. The cost formula of
inventories assigned is first in-first out.
Finished Goods P 420,000.00 P 210,000.00
Goods in Process 295,000.00 252,000.00
Raw Materials 250,000.00 360,000.00
P 462,000.00
Total Inventories P 965,000.00 822,000.00
Note 7 - Property and Equipment
Property and equipment are initially recorded at cost and subsequently presented at net
of accumulated depreciation. and impairment
2,018.00 2,017.00
Machineries and Equipment P 2,400,000.00 P 2,400,000.00
Less: Accumulated Depreciation (400,000.00) (250,000.00)
Net Book Value 2,000,000.00 2,150,000.00
Store Equipments 500,000.00 500,000.00
Less: Accumulated Depreciation (135,000.00) (85,000.00)
Net Book Value 365,000.00 415,000.00
Office Equipments 150,000.00 150,000.00
Less: Accumulated Depreciation (75,000.00) (45,000.00)
Net Book Value 75,000.00 105,000.00
Property and Equipments P 2,440,000.00 P 2,670,000.00
Depreciation is computed on the straight line basis and the residual value is generally
ignored in computing depreciation and will be credited to miscellaneous income when
finally disposed of at the end of their useful lives; depreciable cost over estimated usfeul
lives of economic assets. The estimtaed useful life of the property and equipments are as
follows:
Machineries 15 years
Machineries Equipment 5 years
Store Equipment 10 years
Office Equipment 5 years
Other Assets 5 years
Note 8 - Trade and Other Payables
2,018.00 2,017.00
Accounts Payable P 290,700.00 P 340,000.00
Accrued Expenses 55,000.00 35,400.00
Income Tax Payable 157,800.00 141,300.00
Total Trade and Other Payables P 503,500.00 P 516,700.00
A local government file agains the company for violation of environmental laws. The best
estimates amount of contingent liability/loss is P240,000.
Note 9 - Note Payable - Long Term Debt
Excelent Toys Inc. converted the note payable inyo a ten-year long-term debt. The
machineries is used as collateral for this long-term note payable. The note has an interest
rate of 18% and is for a period of 10 years payable in ten equal yearly amortizations
staring in 2019.
Sales are made on the basis of normal credit terms and are presented net of returns and
discounts
2,018.00 2,017.00
Gross Sales P 6,950,000.00 P 5,850,000.00
Sales Returns and Allowances (10,000.00) (6,000.00)
Sales Discounts (18,000.00) (12,000.00)
Net Sales P 6,922,000.00 5,832,000.00
Excellent Toys Inc. entered into a long-term lease agreement with owner of the premises
it is presently occupying for a period of twenty years. The contract is open for only a one-
time renewal of another 20 years.
Current assets
Current Ratio=
Current liabilities
2,175,000.00
=
541,500.00
= 4.02 :1
Excellent Toys Inc. has a high level of liquidity and a less chance of cash squeeze. The entity is able
to pay off its current liabilities using its current assets 4.02 times.
Profitability ratio
1. Gross profit ratio or Gross Margin Ratio
Gross profit
=
Net sales
1,424,000.00
=
6,922,000.00
0.21 :1
=
or
= 20.57%
An entity is available to pay operating expenses less than 20.57% of net sales to provide profit for
owners.
The entity will earn a P0.05 after tax profit per 1 peso of sales.
3. Return on investment (ROI) or
Return on asset (ROA)
= Net profit + Interest ( net of tax)
x100
Average Total Assets
368,200.00 + 75,600.00
= x 100
4,370,500.00
443,800.00
= x 100
4,370,500.00
= 10.15 %
The entity has a return of P0.10 after-tax profit per 1 peso of assets invested in the bysuness by
both creditors and owners.
4. Return on ordinary equity
Net profit - Preferred Dividends
= x100
Average ordinary Shareholders' equity
368,200.00 - 0.00
= x100
2,400,000.00
368,200.00
= x100
2,400,000.00
= 15.34 %
The entity has a return on ordinary equity of P0.15 after-tax profit per 1 peso of common
shareholders' investment in the firm.
5. Returm on Total Equity
Net profit - Dividends on Rredeemable Preferred Shares
= x100
Average Total Equity
368,200.00 - 0.00
= x100
3,264,400.00
368,200.00
= x100
3,264,400.00
= 11.28 %
The after-tax net profit of preferred dividends on redeemable preferred shares per 1 peso of total
shareholders' equity in the firm is P0.11.
Turn-over ratio
1. Finished Goods or Inventory Turnover
Cost of sales
=
Average Finished goods Inventory
5,498,000.00
=
390,000.00
= 14.10 times
The entity has been sold and replaced the inventories 14.10 times during 2018. The inventories are
significantly turned fastly into the cost of goods sold.
2. Average Sale Period or Average age of Inventory
365 days
=
Inventory Turnover
days
365
= 14.10 times
= 26 days
The entity takes only 26 days to sell the entire/average inventory.
= 365 days
20.48 times
= 18 days
The entity takes an average of 18 days to collect the credit sales.
5. Operating cycle or conversion period
= average age of inventories + average age of receivables
26 days
=
18 days
= 44 days
The inventories of the entity takes an average of 44 days to convert in into cash.
6. Total Asset Turnover
Net sales
=
Average Total Assets
6,922,000.00
=
4,370,500.00
= 1.58 times
The entity is producing P1.58 of revenues for every 1 asset of the entity owns.
7. Accounts payable Turnover
Net Credit Purchases or Net Purchases
=
Average Accounts payable
3,907,000.00
=
315,350.00
= 12.39 times
The entity has an effective utilizing the trade credit line offered by suppliers in financing its purchase.
8. Ave. Age of Accounts payable or Average payment period
365 days
=
Accounts payable Turnover
365 days
=
12.39 times
= 29 days
The firm takes an average of 29 days to pay all of its credits purchases.