ACCOUNTING 102

Financial Statements

The following account balances are taken from the ledger of Djukovic Corporation as of December 31, 2011:

Ordinary share capital 31,000,000 Share premium 2,150,000

Merchandise inventory, Jan. 1 7,329,000 Merchandise inventory, Dec. 31 8,245,00
Security services
140,000
Investment in ABC ordinary shares 946,000 Accrued expenses 286,000
Investment income 106,000 Investment in equity securities 1,887,000

Land 9,480,000 Building 22,770,000

Purchases 65,336,000 Purchase discount 1,084,000
Commission expense 145,000 Unrealized gain – OCI 18,000
Sales salaries 1,200,000 Office salaries 2,400,000
Gain on foreign currency 39,000 Interest expense 633,000

BSP treasury bills 540,000 Prepaid building insurance 42,000

Creditors’ accounts with debit balances 29,000 Franchise 3,500,000
Store equipment 870,000 Accum. depr. – Building 2,548,000
Investment in affiliate 2,800,000
Advances to affiliates 600,000 Bonds payable 5,000,000

Accum. depr. – Store equipment 154,000 Sales discount 886,000

Freight in 1,258,000 Mortgage payable 4,800,000
Dividend revenue 45,000 Depreciation – Building 320,000
Depreciation – Office equipment 48,000 Leasehold 540,000
Office equipment 684,000

Bank overdraft 32,000 Cash in closed bank 276,000

Investment in DEF bonds 2,950,000 Accounts receivable 10,658,000
Notes payable 845,000 Interest income 53,000
Store equipment repairs 19,000 Insurance expense – Building 48,000
Accum. depr. - Office equipment 132,000

Appropriated for contingencies 400,000 Share dividends payable 1,200,000

Accounts payable 8,336,000 Treasury shares , 6,000 shares, at cost 720,000
Time deposit 2,200,000 Sales returns & allowances 626,000
Purchase returns 884,000 Commission income 387,000
Legal expenses 156,000 Freight out 226,000

VAT payable 234,000 SSS contributions 204,000

Philhealth contributions 48,000 Light, telephone & water 359,000
Auditing fees 240,000 Pag-ibig contributions 72,000
Change fund 10,000 Cash surrender value of life insurance 346,000
Withholding taxes payable 84,000 Unused supplies 38,000

Loss on accident 177,000 SSS, PH & Pag-ibig payable 83,000

Estimated warranties liability 805,000 Unearned income 56,000
Miscellaneous selling expenses 62,000
Miscellaneous office expenses 37,000 Depreciation – Store equipment 39,000
Sales 81,841,000 Land held for speculation 2,500,000
Idle land 1,200,000 Cash in banks ?
Retained earnings 8,765,000 Dividends paid during the year 1,000,000
Share premium-Treasury shares 50,000 Appropriated for sinking fund 1,000,000
Share premium-Share dividends 240,000

Additional information:
1. The entity adopted significant accounting policies which are in accordance with the Philippine Financial
Reporting Standards and the rules and regulations of the Securities and Exchange Commission. These
accounting policies have been applied on a consistent basis.
2. The ordinary shares consist of 500,000 shares authorized with a par value of 100 per share. During the year,
32,000 shares were issued at 112 per share.
3. The straight line method of depreciation is used for all property and equipment items based on their estimated
lives. The building is occupied 60% by the sales office and 40% by the administrative office.

4. Merchandise inventory is valued using the first-in, first-out method of costing, periodic basis
5. The BSP treasury bills were acquired on November 30, 2011 and will mature on January 15, 2012.
6. The investment in affiliate consists of 25,000 ordinary shares of Roland Garros Corporation representing a
25% interest in the total authorized capital of the corporation.

7. The investment in ABC ordinary shares and in DEF bonds are held for trading purposes. Their fair values at
year-end are 972,000 and 2,980,000, respectively.
8. The investment in equity securities are not held for trading. Its fair value at year-end is 1,852,000.
9. The time deposit of 2,200,000 is a 4.5% 60-day time deposit opened at BDO on December 7, 2011.

10. The mortgage payable is a 3-year 18% loan obtained from Banco de Oro on August 1, 2011. It is payable in
three equal annual installments plus interest beginning August 1, 2012. It is secured by a mortgage on the
company’s land and building.

11. Retained earnings was appropriated for sinking fund during the year, 500,000.
12. Payroll contributions are to be allocated to selling and administrative expenses in the ratio of salaries.

REQUIRED
Prepare a statement of comprehensive income, a statement of financial position and a statement of changes in
equity based on Philippine Financial Reporting Standards including any notes to financial statements.