Purrfect, Inc., reports the following statement of financial position amounts as of June 30,2020 Current asset P 2,440,500 Noncurrent assets 6,285,500 Current liabilities 1,386,000 Noncurrent liabilities 900,000 Owner’s equity 6,440,000 A review of account balances reveals the following data An analysis of current assets discloses the following:
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.
Purrfect, Inc., reports the following
Current asset P 2,440,500
Noncurrent assets 6,285,500
Current liabilities 1,386,000
Noncurrent liabilities 900,000
Owner’s equity 6,440,000
A review of account balances reveals the following data
An analysis of current assets discloses the following:
|
Cash |
P 422,500 |
|
Investment securities-trading |
600,000 |
|
Trade accounts receivable |
568,000 |
|
Inventories, including advertising supplies of P20,000 |
850,000 |
|
|
2,440,500 |
Noncurrent assets include the following:
|
Property, plant and equipment: |
|
|
|
5,490,000 |
|
Deposit with a supplier for merchandise ordered for August delivery |
21,500 |
|
|
774,000 |
|
|
6,285,500 |
Current liabilities include the following:
|
Payroll payable |
P 71,500 |
|
Taxes payable |
41,500 |
|
Rent payable |
114,000 |
|
Trade accounts payable (net of 15,000, 6 months note, received from a supplier who purchased some used equipment on June 29,2020 |
999,000 |
|
Notes payable |
160,000 |
|
|
1,386,000 |
- Noncurrent liabilities include the following
|
9% mortgage on property, plant and equipment, payable in semiannual installment of P90,000 through to June 30,2025 |
P900,000 |
Owners’ equity includes the following:
|
|
P3,800,000 |
|
Ordinary share capital; 1,600,000 shares at P1 par value |
1,600,000 |
|
Share premium |
1,040,000 |
|
|
6,440,000 |
|
|
|
Ordinary shares were originally issued for P3,910,000, but the losses of the company for the past years were charged against share premium.
Required:
- Based on the above information, determine the adjusted amount of the following:
- Current Liabilities
Step by step
Solved in 2 steps
