Illustrative problem: Preparation of Statement of Financial Position

RST Co.’s post-closing trial balance on December 31, 20x2 shows the following account balances:

Accounts Dr. Cr.

Petty cash 15,000
Cash in bank 1,900,000
90-day money market instruments 800,000
Accounts receivable 122,000
Allowance for bad debt 30,000
Notes receivable (Trade) 8,000
Inventory 200,000
Land 6,000,000
Building 10,000,000
Accumulated depreciation- Bldg. 7,200,000
Equipment 800,000
Accumulated depreciation- Equipment 250,000
Patent 350,000
Accumulated amortization- Patent 315,000
Trademark 120,000
Account payable 100,000
Notes payable- short term loan 200,000
Notes payable- long term loan (P50,000 due in 1yr.) 1,450,000
Income tax payable 670,000
Interest payable 65,000
Salaries payable 105,000
Utilities payable 8,000
Unearned income 35,000
Provision for warranty obligation 260,000
Deferred tax liability 70,000
Share capital 3,500,000
Retained earnings 5,440,000
Revaluation surplus 260,000
Cumulative translation gain- foreign operation 357,000
Totals 20,315,000 20,315,000

Requirement: Prepare the statement of financial position using the report form.

Solution:
Entity A
Statement of Financial Position
As of December 31, 20x2
Notes
ASSETS
Current assets
Cash and cash equivalents 1 ₱2,715,000
Trade and other receivables 2 100,000
Inventories 200,000
Total current assets 3,015,000
Noncurrent assets
Property, plant and equipment 3 9,350,000
Intangible assets 4 155,000
Total noncurrent assets 9,505,000
Total assets ₱12,520,000
LIABILITIES AND EQUITY
Current liabilities
Trade and other payables 5 ₱313,000
Short-term borrowings 200,000
Current tax payable 670,000
Current portion of long-term borrowings 50,000
Provisions 260,000
Total current liabilities 1,493,000
Noncurrent liabilities
Long-term borrowings 1,400,000
Deferred tax liability 70,000
Total noncurrent liabilities 1,470,000
Total liabilities 2,963,000
Equity
Share capital 6 3,500,000
Retained earnings 5,440,000
Other components of equity 7 617,000
Total equity 9,557,000
Total Liabilities and Equity ₱12,520,000

The breakdowns of the line items are shown in the “notes” (i.e., the 5 th component of a complete set
of financial statements) as follows:

Note 1: cash and cash equivalents

This line item consists of the following:

Cash on hand ₱15,000

Cash in bank 1,900,000
Cash equivalents 800,000
Cash and cash equivalents ₱2,715,000

Note 2: trade and other receivables

This line item consists of the following:

Account receivable ₱122,000

Allowance for bad debts (30,000)
Notes receivable 8,000
Trade and other receivables ₱100,000
Note 3: Property, plant and equipment
This line item consist of the following:

Land ₱6,000,000
Building 10,000,000
Accumulated depreciation- Bldg. (7,200,000)
Equipment 800,000
Accumulated depreciation- Equipment (250,000)
Property, plant & equipment ₱9,350,000

Note 4: Intangible asset

This line item consist of the following:

Patent ₱350,000
Accumulated depreciation- Patent (315,000)
Trademark 120,000
Intangible assets 155,000

Note 5: Trade and other payables

This line item consist of the following:

Account payable ₱100,000

Interest payable 65,000
Salaries payable 105,000
Utilities payable 8,000
Unearned income 35,000
Trade and other payables ₱313,000

Note 6: Share capital

Share Capital consist of the following:
Shares Capital
Common shares - ₱10 par value
Authorized - 1,000,000 shares
Issued and outstanding:
Balance at beginning of year 100,000 ₱1,000,000
Issued during the year 250,000 ₱2,500,000
Balance at end of year 350,000 ₱3,500,000
On January 31, 20x2, the Company filed an application with the PSE for a listing of additional 250,000
common shares through a stock rights offering at a price of ₱10 per share. Proceeds amounting to
₱2,500,000 were received in December 20x2 upon completion of the stock rights offering.

Note 7: Other components of equity

This line item consist of the following:

Revaluation surplus ₱260,000

Cumulative translation gains on foreign operations 375,000
Total long-term borrowings 617,000