CHAPTER 3 ACTIVITY

PROBLEM SOLVING:

Presented below is the Comparative Financial Statements of Litub-Dumalagan

General Merchandise for the year 2020 and 2021:

LITUB-DUMALAGAN GENERAL MERCHANDISE

Comparative Statement of Financial
Position For the Year 2020 & 2021
2020 2021
ASSETS
Cash 87,400.00 110,000.00
Accounts Receivable 69,920.00 90,000.00
Inventory 218,500.00 129,000.00
Prepaid Rent 4,370.00 12,000.00
Total Current Assets 380,190.00 341,000.00

Land 493,810.00 550,000.00

Building 50 0,000.00
DR A F T
600,000.00
Total Noncurrent Assets 993,810.00 1,150,000.00

TOTAL ASSETS 1,374,000.00 1,491,000.00

LIABILITIE
S
Accounts Payable 250,000.00 200,000.00
Notes payable 150,000.00 300,000.00
Total Current Liabilities 400,000.00 500,000.00

Mortgage Payable 160,000.00 180,000.00

Loan Payable 150,000.00 200,000.00
Total Noncurrent Liabilities 310,000.00 380,000.00

TOTAL LIABILITIES 710,000.00 880,000.00

OWNER’S EQUITY
Ghosting, Capital 664,000.00 611,000.00
Total Liabilities & Owner’s Equity 1,374,000.00 1,491,000.00
 LITUB-DUMALAGAN GENERAL MERCHANDISE
Comparative Statement of Comprehensive Income
End the Year 2020 & 2021
2020 2021
Net Sales 686,000.00 810,000.00
Cost of Goods Sold 348,300.00 301,750.00
Gross Profit 337,700.00 508,250.00
Operating Expenses 205,800.00 234,900.00
Earnings Before Interest and Taxes 131,900.00 273,350.00
Interest Expense 17,150.00 40,500.00
Net Income Before Tax 114,750.00 232,850.00
Income Tax 34,425.00 69,855.00
Net Income After Tax 80,325.00 162,995.00

Required:

1. Prepare a horizontal analysis for the Comparative Statement of Financial Position.

2. Prepare a vertical analysis for the Comparative Statement of Comprehensive Income.
3. Compute the following ratios for the comparative periods. The company used 365
days in its computation for some of the ratios.
a. Working Capital

b. Current Ratio DRAFT

c. Acid Test Ratio

d. Accounts Receivable Turnover Ratio
e. Average Collection Period
f. Inventory Turnover Ratio
g. Average Days in Inventory
h. Number of Days in Operating Cycle
i. Debt to Total Assets ratio
j. Debt to Equity Ratio
k. Times Interest Earned Ratio
l. Gross Profit Ratio
m. Profit Margin Ratio
n. Operating Expenses to Sale Ratio
o. Return on Assets
p. Return on Equity
q. Assets Turnover ratio

4. Analyze your answers on what do they imply in relation to the company’s

performance in the past two (2) years.