Activity 1.6.A: Basic Financial Statements Preparation

Activity 1.6.
A: Basic Financial Statements Preparation
Instructions: Before answering the following problems, read Handouts 1 and Handout 2; and watch the
tutorial videos in Module 1.6 channel. Examples are provided in the learning materials posted.
Problem 1
The following information is extracted from the completed 10-column worksheet of AVL Company.
AVL Company
Adjusted Trial Balance
Dec. 31, 2019
Cash P 150,000
Accounts Receivable 400,000
Allowance for Bad Debts P 30,000
Prepaid Rent 150,000
Office Supplies 80,000
Office Equipment 1,600,000
Accumulated Depreciation -OE 250,000
Building 1,500,000
Accumulated Depreciation - Building 600,000
Accounts Payable 400,000
Accrued Salaries Expense 30,000
Unearned Service Revenue 100,000
Notes Payable (Long-term) 1,000,000
AVL, Capital 1,300,000
AVL, Withdrawals 150,000
Service Revenue 1,494,000
Salaries Expense 280,000
Depreciation Expense 150,000
Advertising Expense 120,000
Rent Expense 150,000
Utilities Expense 100,000
Interest Expense (Notes) 100,000
Office Supplies Expense 50,000
Taxes and Licenses 194,000
Bad Debts 30,000
TOTAL P 5,204,000 P 5,204,000
Required: Prepare the following financial statements:

1. Statement of Comprehensive Income (Income Statement)
2. Statement of Changes in Equity
3. Statement of Financial Position (Balance Sheet)
AVL Company
Statement of Comprehensive Income
For the Year Ended December 31,2019
Income/Revenue:
Service Revenue P1,494,000
Less:Costs/Expenses:
Salaries Expense 280,000
Depreciation Expense 150,000
Advertising Expense 120,000
Rent Expense 150,000
Utilities Expense 100,000
Interest Expense 100,000
Office Supplies Expense 50,000
Taxes and Licenses 194,000
Bad Debts 30,000
Total Expenses (1,174,000)
Profit P 320,000
AVL Company
Statement of Changes in Equity
AVL, Capital, Beginning P 1,300,000

Add: Additional Investments -
Profit 320,000
Total 1,620,000
Less: AVL, Withdrawals (150,000)
Loss -
AVL, Capital, Ending 1,470,000
AVL Company
Statement of Financial Position
December 31,2019
Assets
Current Assets:
Cash P 150,000
Accounts Receivable 400,000
Less: Allowance for Bad Debts (30,000)
Prepaid Rent 150,000
Office Supplies 80,000
Total Current Assets P 750,000
Non-Current Assets:
Office Equipment 1,600,000
Less: Accum. Depr. – OE (250,000)
Building 1,500,000
Less: Accum. Depr. – B (600,000)
Total Non-Current Assets 2,250,000
Total Assets P 3,000,000
Liabilities and Owner’s Equity

Current Liabilities:
Accounts Payable 400,000
Accrued Salaries Expense 30,000
Unearned Service Revenue 100,000
Total Current Liabilities P 530,000
Non-Current Liabilities:
Notes Payable (Long-term) 1,000,000
Total Non-Current Liabilities P1,000,000
Total Liabilities P1,530,000
Owner’s Equity
AVL, Capital, Ending P1,470,000
Total Liabilities and Owner’s Equity P 3,000,000
Problem 2
Shown below is the General Ledger of cash account of AVL Company which are broken down into:
Cash - Debits (Sources) Cash - Credits (Uses)

Investment by owner P 200,000 Payment of rental P 80,000
Cash received from services rendered 100,000 Purchase of Equipment 125,000
Proceeds from a bank loan 150,000 Payment of Utilities Expense 110,000
Collection from customer’s account 75,000 Withdrawal by owner 50,000
Proceeds from sale of an old truck 65,000 Payment of taxes and licenses 12,000
Cash balance – Jan. 1, 2019 – P60,000.
REQUIRED:
Prepare Statement of Cash Flows for the year ended Dec. 31, 2019 using Direct Method.
AVL Company
Statement of Cash Flows
Cash Flows from Operating Activities:

Cash Inflows:
Cash received from services rendered P 100,000
Collection from customer’s account 75,000
Proceeds from sale of an old truck 65,000
Cash Outflows:
Payment of rental (80,000)
Payment of Utilities Expense (110,000)
Payment of taxes and licenses (12,000)
Net Cash Provided (Used) by Operating activities: P 38,000
Cash Flows from Investing Activities:

Cash Inflows:
-0-
Cash Outflows:
Purchase of Equipment (P 125,000)
Net Cash Provided (Used) by Investing Activities (125,000)
Cash Flows from Financing Activities:

Cash Inflows:
Investment by owner P 200,000
Proceeds from bank loan 150,000
Cash Outflows:
Withdrawal by owner (50,000)
Net Cash Provided (Used) by Financing Activities: 300,000
Net Increase in Cash 213,000
Cash Balance, January 01, 2019 60,000
Cash Balance, December 31, 2019 P 273,000

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Activity 1.6.

A: Basic Financial Statements Preparation

Required: Prepare the following financial statements:

AVL, Capital, Beginning P 1,300,000

Liabilities and Owner’s Equity

Cash - Debits (Sources) Cash - Credits (Uses)

Cash balance – Jan. 1, 2019 – P60,000.

Cash Flows from Operating Activities:

Cash Flows from Investing Activities:

Cash Flows from Financing Activities:

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