ration was incorporated on Dec. 1, 2021, and began operations one week later. Before closing the books for the fiscal year ended Nov. 30, 2022, the controller prepared the following financial statements: AACA Corporation

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Problem No. 1

AACA Corporation was incorporated on Dec. 1, 2021, and began operations one week later. Before closing the books for the fiscal year ended Nov. 30, 2022, the controller prepared the following financial statements:

AACA Corporation

Statement of Financial Position

November 30, 2022

Assets

 

Current assets

 

  Cash

P150,000

  Marketable securities, at cost  

60,000

  Accounts receivable  

450,000

  Allowance for doubtful accounts  

(  59,000)

  Inventories

430,000

  Prepaid insurance

    15,000

  Total current assets

  1,046,000

Property, plant and equipment  

426,000

Less accumulated depreciation

  (   40,000)

    Property, plant and equipment, net

      386,000

Research and development costs  

    120,000

Total assets

P1,552,000

   





Liabilities and Shareholders' Equity

 
   
   

Current liabilities

 

    Accounts payable and accrued expenses

P  592,000

    Income taxes payable  

    224,000

    Total current liabilities

    816,000

Shareholders' equity

 

    Share capital, P10 par value

400,000

    Retained earnings

    336,000

    Total shareholders' equity

    736,000

Total liabilities and shareholders' equity

P1,552,000

 

 

AACA Corporation

Statement of Income

For the Fiscal Year Ended November 30, 2022

Net sales

P2,950,000

 

 

Operating expenses:

 

    Cost of sales

1,670,000

    Selling and administrative

650,000

    Depreciation    

40,000

    Research and development

      30,000

 

  2,390,000

Income before income taxes     

560,000

Provision for income taxes     

    224 000

Net income

P   336,000

 

AACA is in the process of negotiating a loan for expansion purposes, and the bank has requested audited financial statements. During the course of the audit, the following additional information was obtained:

  1. The investment portfolio consists of short-term investments in marketable equity securities with a total fair value of P55,050 as of Nov. 30, 2022.
  2. Based on an aging of the accounts receivable as of Nov. 30, 2022, it was estimated that P36,000 of the receivables will be uncollectible.
  3. Inventories at Nov. 30, 2022 did not include work in process inventory costing P12,000, sent to an outside processor on Nov. 29, 2022.
  4. A P3,000 insurance premium paid on Nov. 30, 2022 on a policy expiring one year later was charged to insurance expense.
  5. On June 1, 2022, a production machine purchased for P24,000 was charged to repairs and maintenance. AACA depreciates machines of this type on the straight-line method over a five-year life with no salvage value, for financial and tax purposes.
  6. Research and development costs of P150,000 were incurred the development of a patent, which AACA expects to be granted during the fiscal year ending Nov. 30, 2023. AACA initiated a five-year amortization of the P150,000 total cost during the fiscal year ended Nov. 30, 2022.
  7. During Dec. 2022, a competitor company filed suit against AACA for patent infringement claiming P200,000 damages. AACA's legal counsel believes that an unfavorable outcome is probable. A reasonable estimate of the court's award to the plaintiff is P72,500.
  8. The 40% effective tax rate was determined to be appropriate for calculating the provision for income taxes for the fiscal year ended Nov. 30, 2022. Ignore computation of the deferred portion of income taxes.

 

Based on the given information and the result of your audit, determine the following as of and for the fiscal period ended Nov. 30, 2022 (Input your answers in figures, do not put peso sign, comma, decimals or extra spaces):

  1. Net income 
  2. Current assets 
  3. Total assets 
  4. Total liabilities 
  5. Total equity 
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