ABC Company

Financial Statements

Year Ended December 31, 20X5

(Unaudited – See Notice to Reader)

 ABC COMPANY
Index to Financial Statements
Year Ended December 31, 20X5
(Unaudited – See Notice to Reader)

Page

NOTICE TO READER 1

FINANCIAL STATEMENTS

Balance Sheet 2

Income Statement 3

Statement of Cash Flows 4

Notes to Financial Statements 5

 Totup & tally
CHARTERED PROFESSIONAL ACCOUNTANTS
123–45 STREET * ANYPLACE, BRITISH COLUMBIA * V5A B1B * PHONE: 604.444.4444 * FAX: 604.444.4446

NOTICE TO READER

We have compiled the balance sheet of ABC Company as at December 31, 20X5 and the
statement of income and retained earnings for the year then ended from information provided by
management. We have not audited, reviewed or otherwise attempted to verify the accuracy or
completeness of such information. Readers are cautioned that these statements may not be
appropriate for their purposes.

Totup & Tally

Totup & Tally
Certified Management Accountants

Anyplace, British Columbia

February 15, 20X6

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 ABC COMPANY
Balance Sheet
December 31, 20X5
(Unaudited - See Notice to Reader)

20X5 20X4

ASSETS
CURRENT
Cash $ 280 $ 1,287
Marketable securities (Market value $92,960; 20X4 - $70,000) 55,525 55,525
Accounts receivable 79,747 208,947
Inventory 96,373 70,872
Goods and services tax recoverable 1,469 -
Prepaid expenses 9,730 7,002

Total current assets 243,124 343,633

NON-CURRENT
Property and equipment (Note 1) 52,516 5,295

TOTAL ASSETS $ 296,640 $ 348,928

LIABILITIES AND SHAREHOLDERS’ EQUITY

CURRENT
Bank indebtedness $ 26,000 $ 91,000
Accounts payable and accrued liabilities 57,127 146,537
Incomes taxes payable 647 3,064
Management fee payable 40,000 -
Current portion of long term debt (Note 3) - -
Goods and services tax payable - 4,694

Total current liabilities 123,774 256,081

NON-CURRENT
Long term debt (Note 3) 20,000 -
Due to shareholders 99,382 59,204

Total non-current liabilities 101,382 59,204

TOTAL LIABILITIES 243,156 304,499

SHAREHOLDERS’ EQUITY
Share capital (Note 2) 100 100
Retained earnings 53,384 44,329

TOTAL SHAREHOLDERS’ EQUITY 53,484 44,429

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 296,640 $348,928

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 ABC COMPANY
Income Statement
Year Ended December 31, 20X5
(Unaudited - See Notice to Reader)

20X5 20X4

REVENUES $ 786,046 $ 659,697

COST OF SALES 562,463 505,330

GROSS PROFIT $ 223,583 $ 154,367

EXPENSES
Advertising and promotion $ 3,884 $ 3,534
Depreciation and amortization 9,579 1,324
Employee benefits 363 2,720
Insurance 5,576 4,348
Bank charges 4,020 6,285
Office 5,158 6,906
Professional fees 1,845 2,620
Rental 10,500 10,500
Repairs and maintenance 4,691 1,171
Salaries and wages 108,424 65,199
Sub-contracts 10,015 3,705
Supplies 1,337 475
Telephone 3,392 3,680
Travel 3,456 2,205
Vehicle 22,641 20,837

$ 194,881 $ 135,509

OPERATING INCOME $ 28,702 $ 18,858

INCOME TAXES 4,647 3,064

NET INCOME BEFORE EXTRAORDINARY ITEMS $ 24,055 $ 15,794

EXTRAORDINARY ITEM, NET (Note 4) ( 16,000) -

NET INCOME AFTER EXTRAORDINARY ITEMS $ 8,055 $ 15,794

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 ABC COMPANY
Statement of Cash Flows
Year Ended December 31, 20X5
(Unaudited - See Notice to Reader)

20X5 20X4
OPERATING ACTIVITIES
Net Income $ 8,055 $ 15,794
Items not involving cash
Amortization 9,579 1,324

Change in non-cash working capital items

Accounts receivable 129,200 (18,900)
Inventory (25,501) 18,234
GST recoverable (1,469) -
Prepaid expenses (2,728) (1,580)
Bank indebtedness (65,000) 21,000
Accounts payable and accrued liabilities (89,410) (36,450)
Income taxes payable (2,417) 1,920
Management fee payable 40,000 -
GST payable (4,694) (1,864)

($ 4,385) ($ 522)

INVESTING ACTIVITIES
Expenditures on property, plant and equipment ($ 56,800) ($ 1,850)
($ 56,800) ($ 1,850)

FINANCING ACTIVITIES
Long term debt -
$20,000
Due to shareholders 40,178 -
$60,178 -

Increase (Decrease) in cash ($ 1,007) ($ 2,372)

Cash - beginning of year 1,287 3,659

Cash - end of year $ 280 $ 1,287

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 ABC COMPANY

Notes to the Financial Statements

Year Ended December 31, 20X5
(Unaudited - See Notice to Reader)

1. PROPERTY AND EQUIPMENT

Accumulated 20X5 Net 20X4 Net
Cost Amortization Book Value Book value

Equipment $ 16,109 $ 11,873 $ 4,236 $ 5,295

Motor vehicles 56,800 8,520 48,280 -

$ 72,909 $ 20,393 $ 52,516 $ 5,295

2. SHARE CAPITAL

Authorized
Unlimited Class “A” Common voting shares
Unlimited Class “B” Common non-voting shares
Unlimited Class “A” Preferred non-voting shares

20X5 20X4
Issued
100 Class “A” Common voting shares $ 100 $ 100

3. LONG TERM DEBT ($’000’s)

Interest Rate Due By Currency Dec 31, 20X5 Dec 31, 20X4

Fixed-term debt, redeemable at the company’s option

6.85% Notes 20X9 CAD $ 12 -

6.75% Notes 20X8 CAD 8 -
Total unsecured, long-term debt $ 20 -

Secured long-term-debt $ - $ -
Finance leases $ - $ -

Total Long-term debt $ 20 $ -

Less: Current portion $ - $ -

Long-term debt $ 20 $ -

As of December 31, 20X5, all of the long-term debt had fixed interest rates. The weighted-
average interest rate on the outstanding balances of the Company's long-term debt was
6.81 percent the year ended December 31, 20X5.

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 ABC COMPANY

4. EXTRAORDINARY ITEMS

On December 14, 2015, a dam broke upstream of ABC Company’s primary production facility
causing a massive flood in the area. The damage was extensive and cost the Company
$20,000 to repair and replace damaged portions of the plant. As this amount is material to the
net profits of the Company, it was reported as an extraordinary item on the Company’s
income statement. The amount, net of applicable income taxes, was $16,000.

5. RELATED PARTY TRANSACTIONS

Relationships Nature of the relationship

XYZ Consulting (“XYZ”) XYZ is a company controlled by an
officer and director of ABC Company.
XYZ provides management consulting
services to ABC.

During the year ended December 31, 20X5, the Company incurred $40,000 (20X4 -
nil) for management services provided by XYZ Consulting which is controlled by an
officer and director of the Company.
Key management compensation
Key management are those personnel having the authority and responsibility for
planning, directing and controlling the Company and include the President and Chief
Executive Officer, Directors, and Chief Financial Officer. Key Management
compensation includes:

Year ended Year

December 31, ended
20X5 December
31, 20X4
Salary $ 45,000 $ 40,000
Benefits 363 2,720
Management fees 40,000 -

Total key management compensation $ 85,363 $ 42,720

At December 31, 20X5, $40,000 related to management fees remained unpaid by the
company and is included as management fee payable on the balance sheet.

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