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January 31:
Value assigned to warrants 1,350,000 x (98% - 95%) = P40,500 (classified as APIC)
Entry on Sept. 14
Cash 12,000
Salaries Payable 12,000
Cash 318,000
Sales P2,800,000
Cost of goods sold 1,948,400
Gross profit P 851,600
Realized gross profit on installment sales 108,500
Total gross profit P 960,100
Loss from Repossession ( 8,000)
Gross profit, net of loss on repossession P 952,100
Operating Expenses ( 609,500)
Other Income 71,600
Unrealized Gains on Trading Securities 12,800
Other Expenses and Losses ( 36,500)
Income before interest and taxes P 390,500
Interest expense 158,000
Income before income tax P 232,500
Income tax expense 69,750
Net income P 162,750
Current Assets
Cash P1,015,900
Trading Securities 214,800
Installment Accounts Receivable 340,000
Interest Receivable 16,200
Dividend receivable 2,000
Receivable from officers 45,000
Chapter 9 Shareholders Equity
Inventories 486,500
Prepaid expenses 40,000
Total current assets P2,160,400
Non-current Assets
Property, Plant and Equipment, at cost P5,409,200
Accumulated Depreciation 186,000
Net carrying value P5,223,200
Other Financial Assets 485,000
Total Non-current assets 5,708,200
Total Assets P7,868,600
Current Liabilities
Accounts payable P 508,000
Salaries payable 12,000
Notes payable 538,000
Accrued expenses 115,000
Dividends payable 348,000
Interest payable 22,500
Deferred gross profit 119,000
Income tax payable 69,750
Total current liabilities P1,732,250
Non-current liabilities
Notes payable 1,000,000
Total liabilities P2,732,250
Shareholders Equity
Share Capital P2,900,000
Share Premium 1,450,000
Retained Earnings 692,350 5,042,350
Total Liabilities and Shareholders Equity P7,774,600