EXPANDED TERTIARY EDUCATION EQUIVALENCY AND ACCREDITATION PROGRAM

LICEO DE CAGAYAN UNIVERSITY

RN PELAEZ BLVD., KAUSWAGAN, CAGAYAN DE ORO CITY

FINANCIAL MANAGEMENT
LEARNING ACTIVITIES

I- Introduction to Financial Management

Discuss:
1. What is meant by goal maximization of the shareholders’ wealth?
2. What are the functions of financial management? Explain each
briefly
3. On the forms of business organizations, thoroughly dicuss:
a) Compare and contrast the different forms of business
organizations.
b) Why is a corporation more suitable for large organizations?
4. Dicuss the financial manager’s responsibities.
5. Why is earning profit considered as only one of the objectives of
business?
6. Business firms have multiplier effects in an economy. Explain.
7. Whi is the finance manager in a business concern? What are his
primary activities?
8. Enumerate the functions of the controller and the treasurer.
9. What is the role of the Vice President for Finance in an
Organization?
10.What role does business play in our economy?
 II- Statement of Financial Position/ Balance Sheet

Problem 1- The following account balances were provided by Adam’s

Company as of December 31, 2022:

Notes receivable- trade 2,500,000

Notes payable- trade 1,500,000
Income tax payable 250,000
Patent 150,000
Cash on hand awaiting deposit 500,000
Acount receivable- trade 2,000,000
Finished goods 900,000
Claims receivable 200,000
Franchise 200,000
Goods in process 400,000
Goodwill 500,000
Factory supplies 100,000
Office supplies 40,000
Cash in bank 1,400,000
Sinking fund 250,000
Raw materials 300,000
Ordinary shares, par P100 8,000,000
Time deposit, due in 60 days 1,000,000
Investment in subsidiary 1,200,000
Allowance for doubtful accounts 200,000
Land 2,500,000
Withholding tax payable 150,000
SSS payable 300,000
Accumulated dpreciation- building 1,500,000
Accumulated depreciation- machinery 1,000,000
Refundable deposit of customers- long term 100,000
Prepaid insurance 180,000
Investment in bonds 500,000
Bonds payable 6,000,000
Building 6,000,000
Machinery 3,000,000
Advances to officers collectible in 2025 1,800,000
Share premium 200,000
Retianed earnings 3,860,000
Accrued interest on notes receivable 120,000
Deferred tax liability 100,000
Accounts payable 2,500,000
Trading securities 400,000
Cash surrender value 120,000
Retained earnings appropriated for contingencies 500,000
Warranty payable 300,000

Required: Prepare the statement of financial position of Adam’s

Company as of December 31,2022 with supporting schedule.
Problem 2- Merchandising Concern

The records of Tiger Company showed the following data for year 2022:

Sales 12,500,000
Sales returns and allowances 260,000
Sales discounts 140,000
Purchases 7,300,000
Freight in 250,000
Purchase returns and allowances 180,000
Purchase discounts 120,000
Merchandise inventory, January 1 4,500,000
Merchandise inventory, December 31 5,800,000
Rent income 300,000
Divident income 200,000
Interest income 200,000
Income tax expense 1,104,000
Doubtful accounts 150,000
Freight out 120,000
Office salaries 900,000
Sales salaries 700,000
Salesmen’s commission 400,000
Loss on sale of equipment 100,000
Depreciation- building 400,000
Depreciation- office equipment 150,000
Depreciation- store furniture 100,000
Depreciation- delivery truck 150,000

Required: Prepare the statement of comprehensive income for the year

using:

Function of expense method with supporting notes.

Problem 3- Manufacturing Concern

Sparkling Company had inventories during year 2022 as follows:

January December
Raw materials 450,000 550,000
Goods in process 500,000 420,000
Finished goods 650,000 520,000

Additional data were provided as follows:

Sales 10,000,000
Sales returns and allowances 200,000
Sales discounts 80,000
Raw materials purchased 3,500,000
Freight in 100,000
Purchase returns and allowances 200,000
Purchase discounts 110,000
Payroll- direct labor 900,000
Payroll- indirect labor 320,000
Payroll- factory supervisor 280,000
Repair and maintenance
Machinery 60,000
Delivery truck 40,000
Salaries
Office 400,000
Store 250,000
Depreciation
Administrative building 150,000
Factory building 100,000
Store equipment 50,000
Office equipment 60,000
Delivert truck 100,000
Machinery 120,000
Heat, light and power 300,000
Supplies used
Office 20,000
Store 30,000
Factory 40,000
Freight out 40,000
Doubtful accounts 100,000
Auditing and legal fees 180,000
Interest income 90,000
Gain on sale of store equipment 50,000
Income tax expense 876,000

Required: Prepare the following:

1. Statement of cost of goods manufactured
2. Statement of comprehensive income using
Function of expense method with supporting notes.
Problem 4- Star Company provided the following data for the
preparation of statement of cash flows for 2022 using Direct Method.

Cash balance, beginning 1,500,000

Cash paid to purchased inventory 7,800,000
Cash received from the sale of building 5,600,000
Cash paid for interest 450,000
Cash paid to repay a loan 1,000,000
Cash collected from customers 10,000,000
Cash received from issuance of ordinary shares 1,200,000
Cash paid for dividends 780,000
Cash paid for income tax 1,320,000
Cash paid to purchase machinery 1,950,000

Required:
Prepare statement of cash flows using direct method.
Problem 5- Fragile Company had the following cash flows for 2019
using direct method.

Cash receipts from issuance of ordinary shares 4,000,000

Cash receipts from customers 2,000,000
Cash receipts from sale of long term investment 300,000
Cash payment for wages 1,200,000
Cash payment for dividends 200,000
Cash payments for taxes 400,000
Cash payment to purchased land 800,000
Proceed from sale of building 1,000,000
Amortization of long term debt 500,000
Cash paid to suppliers 700,000
Cash received from bank loan 400,000

Required:
Prepare a statement of cash flows for 2019
Problem 6- Hill Company provided the following statement of financial
position.

Assets 2023 2022

Cash and cash equivalents 750,000 950,000
Accounts receivable 1,750,000 1,100,000
Inventory 2,550,000 1,800,000
Prepaid expenses 100,000 150,000
Property, plant and equipment 5,300,000 4,300,000
Accumulated depreciation (1,150,000) (800,000)
9,300,000 7,500,000

Liabilities and equity 1,250,000 1,000,000

Accounts payable 50,000 200,000
Accrued expenses 4,750,000 4,250,000
Share capital 3,250,000 2,050,000
Retained earnings 9,300,000 7,500,000

Additional information:

1. The statement of retained earnings for 2023 showed net income

of 1,500,000 and cash divident paid of 300,000.
2. During the year, the entity purchased equipment for cash and
issued share capital for cash.

Required:
Prepare a statement of cash flows for 2023 using the indirect
method.