ASSESSMENT

Assessment #3: Chapter 7, Problem 7

Garcia’s Health Care, Inc.

Statement of Financial Position
As of December 31, 20x4 and 20x5
(in millions of pesos)

20x4 20x5
ASSETS
Current Assets:
Cash and Marketable Securities ₱ 395 ₱ 421
Accounts Receivable 1,020 1,109
Inventory 1,581 1,760
Total ₱ 2,996 3,290

Fixed Assets
Gross Plant and Equipment ₱ 4,743 ₱ 5,812
Less: Depreciation 640 840
Net Plant and Equipment 4,103 4,972
Other long-term assets 790 892
Total 4,893 5,864
TOTAL ASSETS ₱ 7,889 ₱ 9,154

LIABILITIE AND EQUITY

Current Liabilities:
Accrued wages and taxes ₱ 242 ₱ 316
Accounts Payable 791 867
Notes Payable 714 872
Total 1,747 2,055
Long-term debt 3,005 3,090
Stockholders’ equity
Preferred Stock (25 million shares) 60 60
Common stock and paid in surplus (200 637 637
million shares)
Retained Earnings 2,440 3,312
Total 3,137 4,009
TOTAL LIABILITIES AND EQUITY ₱ 7,889 ₱ 9,154

Garcia’s Health Care, Inc.

Income Statement
For Years Ended December 31, 20x4 and 20x5

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 (in millions of pesos)
20x4 20x5
Net Sales ₱ 4,348 ₱ 4,980
Less: Cost of goods sold 2,135 2,371
Gross Profit 2,213 2,609
Less: Depreciation 191 200
Earnings before interest and taxes 2,022 2,409
Less: Interest 285 315
Earnings before taxes 1,737 2,094
Less: Taxes 632 767
Net Income ₱ 1,105 ₱ 1,327
Less: Preferred Stock Dividends ₱ 60 ₱ 60
Net Income Available to Common 1,045 1,267
Stockholders
Less: Common stock dividends 395 395
Addition to Retained Earning ₱ ₱ 872
650
Per (common) share data:
Earnings per share (EPS) ₱ 5.225 ₱ 6.335
Dividends per share (DPS) ₱ 1.975 ₱ 1.975
Book value per share (BVPS) ₱ 15.385 ₱ 19.745
Market value (price) per share (MVPS) ₱ 22.500 ₱ 26.850

Solution:
20x4 20x5
EPS 1.045M / 200 M = 5.225 1.267 M / 200M = 6.335
DPS 395M / 200M = 1.975 395 M / 200M = 1.975
BVPS 3,137 – 60 / 200M = 4,009 – 60 / 200M =
15.385 19.745

Garcia’s Health Care, Inc.

Statement of Cash Flows
For Year Ended December 31, 20x5
(in millions of pesos)

20x5
A. Cash flows from operating activities
Net Income ₱ 1, 327
Add: (sources of cash)
Depreciation 200
Increase accrued wages and taxes ( 316-242) 74
Increase in accounts payable (867 – 791) 76

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 Less: (uses of cash)
Increase in accounts receivable (1, 109 – 1, 89
020)
Increase in inventory (1, 760 – 1, 581) 179
Net cash flow from operating activities ₱ 1, 409

B. Cash flows from investing activities

Less:
Increase fixed assets (5, 812 - 4, 743) ₱ 1, 069
Increase in other long-term assets (892 – 790) 102
Net cash flow from investing activities ₱ (1, 171)

c. Cash flows from financing activities

Add:
Increase in notes payable (872 – 714) ₱ 158
Increase in long-term debt (3, 090 – 3, 005) 85
Increase in common and preferred stock -
Less:
Pay dividends (60 + 395 ) 455
Net Cash flow from financing activities ₱ (212)

D. Net change in cash and marketable ₱ 26

securities

Garcia’s Health Care, Inc.

Statement of Retained Earnings
As of December 31, 20x5
(in millions of pesos)

20x5
Balance of retained earnings, December ₱ 2,440
31, 20x4
Plus: Net Income for 20x5 1,327
Less: Cash dividends paid
Preferred Stock 60
Common Stock 395
Total cash dividends paid (455)
Balance of retained earnings, December ₱ 3,312
31, 20x5

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