The statement of financial position and profit or loss of an entity on December 31, 20x1 shows the following information: Cash and cash equivalents 1,500,000 Trade and other receivables 3,000,000 Inventories 9,000,000 Investment property (Cost model) 3,500,000 Investment in associate 2,000,000 Property, plant and equipment 12,500,000 Total assets 31,500,000 Trade and other payables 12,250,000 Current tax payable 4,500,000 Deferred tax liability 1,750,000 Ordinary share capital 5,000,000 Retained earnings 6,750,000 Other components of equity 1,250,000 Total liabilities & equity 31,500,000 Revenue 5,600,000 Cost of sales (2,000,000) Gross profit 3,600,000 Distribution of cost (780,000) Administrative expenses (900,000) Impairment loss (reversal) on assets held for sale Finance costs (300,000) Share of profit of associates 240,000 Profit for the period from continuing operations 1,860,000 Discontinued Operations: Profit for the period from discontinued operations -_ Profit for the period 1,302,000 On December 31, 20x1, the entity commits to a plan to sell an equipment with carrying amount of P2,800,000. The following will be sold together with the equipment accounts receivable with carrying amount of P200,000, inventories with carrying amount of P560,000 and accounts payable with carrying amount of P360,000. The entity determines that the equipment has a fair value less costs to sell of P1,600,000. The carrying amounts of the other assets and the liability approximate their fair value less costs to sell. All the conditions of PFRS 5 are met. Requirement: Prepare the December 31, 20x1 classified statement of financial position and the statement of profit or loss of the entity. Ignore the effects of income taxes.
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
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Cash and cash equivalents 1,500,000
Trade and other receivables 3,000,000
Inventories 9,000,000
Investment property (Cost model) 3,500,000
Investment in associate 2,000,000
Property, plant and equipment 12,500,000
Total assets 31,500,000
Trade and other payables 12,250,000
Current tax payable 4,500,000
Deferred tax liability 1,750,000
Ordinary share capital 5,000,000
Retained earnings 6,750,000
Other components of equity 1,250,000
Total liabilities & equity 31,500,000
Revenue 5,600,000
Cost of sales (2,000,000)
Gross profit 3,600,000
Distribution of cost (780,000)
Administrative expenses (900,000)
Impairment loss (reversal) on assets held for sale
Finance costs (300,000)
Share of profit of associates 240,000
Profit for the period from continuing operations 1,860,000
Discontinued Operations:
Profit for the period from discontinued operations -_
Profit for the period 1,302,000
On December 31, 20x1, the entity commits to a plan to sell an equipment with carrying amount of P2,800,000. The following will be sold together with the equipment
inventories with carrying amount of P560,000 and accounts payable with carrying amount of P360,000. The entity determines that the equipment has a fair value less costs to sell of P1,600,000. The carrying amounts of the other assets and the liability approximate their fair value less costs to sell. All the conditions of PFRS 5 are met.
Requirement: Prepare the December 31, 20x1 classified statement of financial position and the statement of profit or loss of the entity. Ignore the effects of income taxes.
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