What is the Total assets?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
What is the Total assets?
Transcribed Image Text: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
Rescarch and development costs
120,000
Total assets
P1552,000
Transcribed Image Text: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 ycar 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 estimatc 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 endcd Nov. 30, 2022. Ignore computation of the deferred portion of income taxes.
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