EXCELLENT

TOYS
INC
Financial Reporting and Analysis
(2018)

Pauline Joy Aguilar

SBAC1A
EXCELLENT
TOYS
INC
Financial Reporting and Analysis
(2018)

Jerrine Mae Alonzo

SBAC1A
EXCELLENT
TOYS
INC
Financial Reporting and Analysis
(2018)

Kyla Barrameda
SBAC1A
 EXCELLENT
TOYS
INC
Financial Reporting and Analysis
(2018)

Czarina Bocaya
SBAC1A
EXCELLENT
TOYS
INC
Financial Reporting and Analysis
(2018)

Lalaine Guevarra
SBAC1A
 EXCELLENT
TOYS
INC
Financial Reporting and Analysis
(2018)

Kaela Mae Mabuhay

SBAC1A
 Excellent Toys Inc
Chart of Accounts
ASSETS LIABILITIES EXPENSE
Petty Cash Accounts Payable Sales Salaries
Cash in Bank Long-Term Debt Office Salaries
Securities for Trading Long-Term Debt Depreciation-Store Equipment
Accounts Receivable Long-Term Debt Depreciation-Office Equipment
Allowance for doubtful accounts Long-Term Debt Advertising
Raw Materials, Jan.` 1` Salesmen's Commission
Goods in Process, Jan. 1 SHAREHOLDERS' EQUITY Freight Out
Finished Goods, Jan. 1 Share Capital Utilities-Sales Office
Prepaid Expenses Share Premium Utilities-Administrative Office
Machineries and Equipment Retained Earnings Interest Expense
Accumulated Depreciation-Machineries Bad Debts
Store Equipments SALES Professional Fees
Accumulated Depreciation-Store EquipmentsSales
Office Equipments Sales Returns
Accumulated Depreciation-Office Equipments
Sales Discounts COST OF INVENTORIES
Direct Labor
OTHER INCOME Indirect Labor
Gain on Sale of Securities Indirect Materials
Superintendence
PURCHASES Light, Heat, and Power
Purchases Rent-Factory Building
Purchase Returns Taxes-Factory
Purchase Discounts Factory Supplies
Repairs and Maintenance-Machinery
Depreciation-Machineries
 EXCELLENT TOYS INC
Statement of Changes in Shareholder's Equity
For the year ended December 31, 2018

Share Capital Retained Earnings Total

Beginning Balance P 2,300,000.00 P 605,300.00 P 2,995,300.00

Issuance of Ordinary Shares 200,000.00 250,000.00
Net Profit 368,200.00
Balance, end P 2,500,000.00 P 973,500.00 P 3,573,500.00

EXCELLENT TOYS INC

Statement of Retained Earnings
Year Ended December 31, 2018

Retained Earnings, January 1 P 605,300.00

Prior prepaid errors 0
Effects of change in accounting policy 0
Corrected beginning balance 605,300.00
Net Income for the Period 368,200.00
Dividends declared and paid to shareholders 0
Retained Earnings, December 31 P 973,500.00
 EXCELLENT TOYS INC
Income Statement
Year Ended December 31, 2018

Note
Net Sales (10) P 6,922,000.00
Cost of Goods Sold (11) (5,498,000.00)
Gross Income 1,424,000.00
Other Income (12) 5,000.00
Total Income 1,429,000.00

Expenses:
Distribution costs (13) P 618,000.00
Administrative Expenses (14) 285,000.00 903,000.00
Income Before Tax 526,000.00
Income Tax Expense (15) 157,800.00
Net Income P 368,200.00
Note 10 - Net Sales
Gross Sales P 6,950,000.00
Sales Returns and Allowances (10,000.00)
Sales Discounts (18,000.00)
Net Sales P 6,922,000.00

Note 11 - Cost of Goods Sold

Raw Materials, January 1 P 210,000.00
Net Purchases
Purchases P 3,950,000.00
Less: Purchase Returns and Allowances (15,000.00)
Purchase Discounts (28,000.00) 3,907,000.00
Raw Materials Available for Use 4,117,000.00
Raw Materials, December 31 (250,000.00)
Raw Materials Used 3,867,000.00
Direct Labor 810,000.00
Factory Overhead
Indirect Labor 86,000.00
Indirect Materials 36,000.00
Superintendence 150,000.00
Light, Heat, and Power 200,000.00
Rent-Factory Building 180,000.00
Taxes-Factory 40,000.00
Factory Supplies 22,000.00
Repairs and Maintenance-Machinery 60,000.00
Depreciation-Machineries 150,000.00 924,000.00
Total Manufacturing Cost 5,601,000.00
Goods in Process, January 1 252,000.00
Total Cost of Goods in Process 5,853,000.00
Goods in Process, December 31 (295,000.00)
Cost of Goods Manufactured 5,558,000.00
Finished Goods, January 1 360,000.00
Goods Available for Sale 5,918,000.00
Finished Goods, December 31 (420,000.00)
Cost of Goods Sold P 5,498,000.00

Note 12 - Other Income

Gain on sale of Securities P 5,000.00

Note 13 - Distribution Costs

Sales Salaries P 55,000.00
Depreciation-Store Equipment 50,000.00
Advertising 420,000.00
Salesmen's Commission 38,000.00
Freight Out 32,000.00
Utilities-Sales Office 23,000.00
Total Distribution Costs P 618,000.00

Note 14 - Administrative Expenses

Office Salaries P 85,000.00
Depreciation-Office Equipment 30,000.00
Utilities-Administrative Office 30,000.00
Bad Debts 2,000.00
Professional Fees 30,000.00
Interes Expense 108,000.00
Total Administrative Expenses
P 285,000.00
 EXCELLENT TOYS INC
Statement of Financial Position
December 31, 2018

ASSETS

Note
Current Assets:
Cash and Cash Equivalents (4) P 388,900.00
Securities for Trading 300,000.00
Accounts Receivable, net (5) 446,100.00
Inventories (6) 965,000.00
Prepaid Expenses 75,000.00
Total Current Assets P 2,175,000.00

Noncurrent Assets:
Property and Equipment (7) 2,440,000.00
Total Noncurrent Assets 2,440,000.00
Total Assets P 4,615,000.00

LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities:
Trade and Other Payables (8) P 503,500.00
Other Current Liabilities 38,000.00
Total Current Liabilities P 541,500.00

Noncurrent Liabilities:
Note Payable - Long Term Debt (9) 500,000.00
Total Noncurrent Liabilities 500,000.00

Shareholders' Equity
Share Capital, P20 par 2,500,000.00
Reserves 100,000.00
Retained Earnings 973,500.00
Total Shareholders' Equity 3,573,500.00
Total Liabilities and Shareholders' Equity P 4,615,000.00
Note 4 - Cash and Cash Equivalents
Cash in Bank P 378,900.00
Petty Cash 10,000.00
Total Cash and Cash Equivalents P 388,900.00

Note 5 - Accounts Receivable

Accounts Recevable P 456,100.00
Allowance for Doubtful Accounts (10,000.00)
Net Realizable Value P 446,100.00

Note 6 - Inventories
Finished Goods P 420,000.00
Goods in Process 295,000.00
Raw Materials 250,000.00
Total Inventories P 965,000.00

Note 7 - Property and Equipment

Machineries and Equipment P 2,400,000.00
Store Equipments 500,000.00
Office Equipments 150,000.00
Total 3,050,000.00
Accumulated Depreciation (610,000.00)
Carrying Amount P 2,440,000.00

Accumulated Depreciation:
Machineries and Equipment P 400,000.00
Store Equipments 135,000.00
Office Equipments 75,000.00
Total Accumulated Depreciation P 610,000.00

Note 8 - Trade and Other Payables

Accounts Payable P 290,700.00
Accrued Expenses 55,000.00
Income Tax Payable 157,800.00
Total Trade and Other Payables P 503,500.00
 EXCELLENT TOYS INC
Statement of Cash Flows
Year Ended December 31, 2018

Notes
Cash Flow from Operating Activities
Cash Receipts From Customers (16) P 6,685,900.00
Gain from Selling of Trading Securities 5,000.00
Cash Payment to Suppliers (17) (5,540,300.00)
Cash Payments for Operating Expenses(18) (819,400.00)
Sale and Purchased of Trading Securities(19) (150,000.00)
Interest Paid on Borrowings (108,000.00)
Tax Payment (20) (141,300.00)
Net Cash Flows from Operating Activities P (68,100.00)

Cash Flows from Investing Activities

Net Cash Flows from Investing Activities -

Cash Flows from Financing Activities

Cash Received from Issuance of shares(21) 250,000.00
Total Cash Flows from Financing Activities 250,000.00
Increase in Cash 181,900.00
Cash and Cash Equivalent, Beginning 207,000.00
Cash and Cash Equivalent, ending P 388,900.00
Note 16 - Cash Receipt from Customers
Net Sales P 6,922,000.00
Accounts Receivable, ending (456,100.00)
Accounts Receivable, beginning 220,000.00
Total Cash Receipt from Customers P 6,685,900.00

Note 17 - Cash Payment to Suppliers

Cost of Goods Sold P (5,498,000.00)
Depreciation - Machineries 150,000.00
Raw Materials, ending (250,000.00)
Raw Materials, beginning 210,000.00
Goods in Process, ending (295,000.00)
Goods in Process, beginning 252,000.00
Finished Goods, ending (420,000.00)
Finished Goods, beginning 360,000.00
Accounts Payable, ending 290,700.00
Accounts Payable, beginning (340,000.00)
Total Cash Payment to Suppliers P (5,540,300.00)

Note 18 - Cash Payment for Operating Expenses

Distribution costs P (618,000.00)
Administrative Expenses (285,000.00) (903,000.00)
Bad debts 2,000.00
Depreciation - Store Equipment 50,000.00
Depreciation - Office Equipment 30,000.00
Interest Expenses 108,000.00
Prepaid Expense, beginning 65,000.00
Prepaid Expense, ending (75,000.00) (10,000.00)
Other Liabilities, beginning (99,000.00)
Other Liabilities, ending 38,000.00 (61,000.00)
Accrued Expenses, beginning (90,400.00)
Accrued Expenses, ending 55,000.00 (35,400.00)
P (819,400.00)

Note 20 - Tax Payment P 157,800.00

Income Tax Expense (157,800.00)
Income Tax Payable, ending 141,300.00
Income Tax Payable, beginning P 141,300.00
Total Tax Payment

Note 19 - Sale and Purchased of Trading Securities

Purchased of Trading Securities P (300,000.00)
Trading Securities that were sold 150,000.00
Total Sale and Purchased of Trading Securities P (150,000.00)
 EXCELLENT TOYS INC
Notes to Financial Statements
December 31, 2018

Note 1 - Company Information

Excellent toys inc. is engaged in the manufacture of the children's toys. The toys are made from
recycled fabric and wood craps. Because of this, the toys are well-received in the European
markets where environmental protection is of prime importance. Majority of the members of the
company's board of directors are known in the business sector.

Note 2 - Basis of Financial Statements Presentation

2.1 Statement of Compliance

The accompanying financial statements have been prepared in compliance with Philippine
Financial Reporting Standards (PFRS). PFRS are based on International Financial Reporting
Standards issued by the International Accounting Standards Board. PFRS consist of PFRS,
Philippine Accounting Standards (PAS) and Philippine Interpretations issued by the Financial
Reporting Standards Council (FRSC).

2.2 Bases of Measurement

The financial statements of the company have been prepared on historical basis of Accounting.

2.3 Use of Judgments, Estimates and Assumptions

The preparation of the financial statements in accordance with PFRS requires managements to
make judgment, estimets, abd assumptions that affect the application of accounting policies and
the amounts of assets, liabilities, income and expenses reported in the financial statements at the
reporting date. However, uncertainty about these judgments, estimates and assumptions could
result in an outcome that could require a material adjustment to the carrying amount of the affected
asset or liability in the future.

Judgments, estimates and assumptions are continually evaluated and are based on historical
experience and other factors, including expectations of the future events that are believed to be
reasonable under the circumstances. Revisions are recognized in the period in which the
judgments, estimates and assumptions are revised and in any future period affected.

The key estimates and assumptions used in the consolidated financial statements are based upon
management's evaluation of relevant facts and circumstances as of the date of the financial
statements. Actual results could differ from such estimates.
Note 3 - Significant Accounting Policies

The significant accounting policies that have been adopted by the company are summarized below.
PAS 1 (IAS 1), Presentation of Financial Statements
PAS 2 (IAS 2), Inventories
PAS 7 (IAS 7), Statement of Cash Flows
PAS 8 (IAS 8), Accounting Policies, Changes in Accounting Estimates and Errors
PAS 10 (IAS 10), Events After The Reporting Period
PAS 12 (IAS 12), Income Taxes
PAS 16 (IAS 16), Property, Plant and Equipment
PAS 18 (IAS 18), Revenue
PAS 23 (IAS 23), Borrowing Costs
PAS 36 (IAS 36), Iimpairment of Assets
PAS 37 (IAS 37), Provisions, Contingent Liabilities and Contingent Assets
PFRS 16 (IAS 17), Leases
Note 4 - Cash and Cash Equivalents
Cash is valued at face amount, which includes cash in bank and petty cash fund.
2018 2017
Cash in Bank P 378,900.00 P 197,000.00
Petty Cash 10,000.00 10,000.00
Total Cash and Cash Equivalents P 388,900.00 P 207,000.00

Note 5 - Accounts Receivable

Sales are made on the basis of normal credit terms, and the receivables do not bear
interest. It is presented at net realizable value.

2,018.00 2,017.00
Accounts Recevable P 456,100.00 P 220,000.00
Allowance for Doubtful Accounts (10,000.00) (8,000.00)
Net Realizable Value P 446,100.00 P 212,000.00

One of the big customers' premises were razed by big fire. This customer has an
outstanding balance of P100,000 as of December 31, 2018. The customer may be able
to pay only P25,000. P75,000 is doubtful in this customer's account balance.

Note 6 - Inventories

Inventories are valued at the lower of cost or realizable value. The cost formula of
inventories assigned is first in-first out.
Finished Goods P 420,000.00 P 210,000.00
Goods in Process 295,000.00 252,000.00
Raw Materials 250,000.00 360,000.00
P 462,000.00
Total Inventories P 965,000.00 822,000.00
Note 7 - Property and Equipment
Property and equipment are initially recorded at cost and subsequently presented at net
of accumulated depreciation. and impairment
2,018.00 2,017.00
Machineries and Equipment P 2,400,000.00 P 2,400,000.00
Less: Accumulated Depreciation (400,000.00) (250,000.00)
Net Book Value 2,000,000.00 2,150,000.00
Store Equipments 500,000.00 500,000.00
Less: Accumulated Depreciation (135,000.00) (85,000.00)
Net Book Value 365,000.00 415,000.00
Office Equipments 150,000.00 150,000.00
Less: Accumulated Depreciation (75,000.00) (45,000.00)
Net Book Value 75,000.00 105,000.00
Property and Equipments P 2,440,000.00 P 2,670,000.00
Depreciation is computed on the straight line basis and the residual value is generally
ignored in computing depreciation and will be credited to miscellaneous income when
finally disposed of at the end of their useful lives; depreciable cost over estimated usfeul
lives of economic assets. The estimtaed useful life of the property and equipments are as
follows:
Machineries 15 years
Machineries Equipment 5 years
Store Equipment 10 years
Office Equipment 5 years
Other Assets 5 years
Note 8 - Trade and Other Payables
2,018.00 2,017.00
Accounts Payable P 290,700.00 P 340,000.00
Accrued Expenses 55,000.00 35,400.00
Income Tax Payable 157,800.00 141,300.00
Total Trade and Other Payables P 503,500.00 P 516,700.00

A local government file agains the company for violation of environmental laws. The best
estimates amount of contingent liability/loss is P240,000.
Note 9 - Note Payable - Long Term Debt

Excelent Toys Inc. converted the note payable inyo a ten-year long-term debt. The
machineries is used as collateral for this long-term note payable. The note has an interest
rate of 18% and is for a period of 10 years payable in ten equal yearly amortizations
staring in 2019.

Note 10 - Net Sales

Sales are made on the basis of normal credit terms and are presented net of returns and
discounts

2,018.00 2,017.00
Gross Sales P 6,950,000.00 P 5,850,000.00
Sales Returns and Allowances (10,000.00) (6,000.00)
Sales Discounts (18,000.00) (12,000.00)
Net Sales P 6,922,000.00 5,832,000.00

Note 11 - Cost of Goods Sold

Raw Materials, January 1 P 210,000.00

Net Purchases
Purchases P 3,950,000.00
Less: Purchase Returns and Allowances (15,000.00)
Purchase Discounts (28,000.00) 3,907,000.00
Raw Materials Available for Use 4,117,000.00
Raw Materials, December 31 (250,000.00)
Raw Materials Used 3,867,000.00
Direct Labor 810,000.00
Factory Overhead
Indirect Labor 86,000.00
Indirect Materials 36,000.00
Superintendence 150,000.00
Light, Heat, and Power 200,000.00
Rent-Factory Building 180,000.00
Taxes-Factory 40,000.00
Factory Supplies 22,000.00
Repairs and Maintenance-Machinery 60,000.00
Depreciation-Machineries 150,000.00 924,000.00
Total Manufacturing Cost 5,601,000.00
Goods in Process, January 1 252,000.00
Total Cost of Goods in Process 5,853,000.00
Goods in Process, December 31 (295,000.00)
Cost of Goods Manufactured 5,558,000.00
Finished Goods, January 1 360,000.00
Goods Available for Sale 5,918,000.00
Finished Goods, December 31 (420,000.00)
Cost of Goods Sold P 5,498,000.00

Note 12 - Other Income

Gain on sale of Securities P 5,000.00

Other income is from selling of trading securities bought in 2017.

Note 13 - Distribution Costs

Sales Salaries P 55,000.00
Depreciation-Store Equipment 50,000.00
Advertising 420,000.00
Salesmen's Commission 38,000.00
Freight Out 32,000.00
Utilities-Sales Office 23,000.00
Total Distribution Costs P 618,000.00
Note 14 - Administrative Expenses
Office Salaries P 85,000.00
Depreciation-Office Equipment 30,000.00
Utilities-Administrative Office 30,000.00
Bad Debts 2,000.00
Professional Fees 30,000.00
Interes Expense 108,000.00
Total Administrative Expenses P 285,000.00
Note 15 - Income Tax Expense
2,018.00 2,017.00
Net Income before Tax P 526,000.00 P 471,000.00
Income Tax Rate 0.30 0.30
Income Tax Expense 157,800.00 141,300.00
Note 16 - Cash Receipt from Customers
Note 16 - Cash Receipt from Customers
Net Sales P 6,922,000.00
Accounts Receivable, ending (456,100.00)
Accounts Receivable, beginning 220,000.00
Total Cash Receipt from Customers P 6,685,900.00
Note 17 - Cash Payment to Suppliers
Cost of Goods Sold P (5,498,000.00)
Depreciation - Machineries 150,000.00
Raw Materials, ending (250,000.00)
Raw Materials, beginning 210,000.00
Goods in Process, ending (295,000.00)
Goods in Process, beginning 252,000.00
Finished Goods, ending (420,000.00)
Finished Goods, beginning 360,000.00
Accounts Payable, ending 290,700.00
Accounts Payable, beginning (340,000.00)
Total Cash Payment to Suppliers P (5,540,300.00)

Note 18 - Cash Payment for Operating Expenses

Distribution costs P (618,000.00)

Administrative Expenses (285,000.00) (903,000.00)
Bad debts 2,000.00
Depreciation - Store Equipment 50,000.00
Depreciation - Office Equipment 30,000.00
Interest Expenses 108,000.00
Prepaid Expense, beginning 65,000.00
Prepaid Expense, ending (75,000.00) (10,000.00)
Other Liabilities, beginning (99,000.00)
Other Liabilities, ending 38,000.00 (61,000.00)
Accrued Expenses, beginning (90,400.00)
Accrued Expenses, ending 55,000.00 (35,400.00)
Total Cash Payment for Operating Expenses P (819,400.00)
Note 19 - Sale and Purchased of Trading Securities

Purchased of Trading Securities P (300,000.00)

Trading Securities that were sold 150,000.00
Total Sale and Purchased of Trading Securities P (150,000.00)

Note 20 - Tax Payment

Income Tax Expense P 157,800.00

Income Tax Payable, ending (157,800.00)
Income Tax Payable, beginning 141,300.00
Total Tax Payment P 141,300.00

Note 21 - Cash Received From Issuance of Shares

Issued Shares P 200,000.00

Premium 50,000.00
Total Cash Received from Issuance of Shares 250,000.00

Note 22 - Lease Agreement

Excellent Toys Inc. entered into a long-term lease agreement with owner of the premises
it is presently occupying for a period of twenty years. The contract is open for only a one-
time renewal of another 20 years.

Note 23 - Lawsuit Liability

The government filed a case against Excellent Toys Inc. due to the entity does not have a proper
waste disposal system.
ANALYSIS USING FINANCIAL RATIOS:

Current assets
Current Ratio=
Current liabilities
2,175,000.00
=
541,500.00
= 4.02 :1
Excellent Toys Inc. has a high level of liquidity and a less chance of cash squeeze. The entity is able
to pay off its current liabilities using its current assets 4.02 times.

Profitability ratio
1. Gross profit ratio or Gross Margin Ratio
Gross profit
=
Net sales
1,424,000.00
=
6,922,000.00
0.21 :1
=
or
= 20.57%
An entity is available to pay operating expenses less than 20.57% of net sales to provide profit for
owners.

2. Net profit ratio or return on sales

Net profit
=
Net sales
368,200.00
=
6,922,000.00
0.05 :1
=
or
5.32%

The entity will earn a P0.05 after tax profit per 1 peso of sales.
3. Return on investment (ROI) or
Return on asset (ROA)
= Net profit + Interest ( net of tax)
x100
Average Total Assets
368,200.00 + 75,600.00
= x 100
4,370,500.00
443,800.00
= x 100
4,370,500.00
= 10.15 %

The entity has a return of P0.10 after-tax profit per 1 peso of assets invested in the bysuness by
both creditors and owners.
 4. Return on ordinary equity
Net profit - Preferred Dividends
= x100
Average ordinary Shareholders' equity
368,200.00 - 0.00
= x100
2,400,000.00
368,200.00
= x100
2,400,000.00
= 15.34 %
The entity has a return on ordinary equity of P0.15 after-tax profit per 1 peso of common
shareholders' investment in the firm.
5. Returm on Total Equity
Net profit - Dividends on Rredeemable Preferred Shares
= x100
Average Total Equity
368,200.00 - 0.00
= x100
3,264,400.00
368,200.00
= x100
3,264,400.00
= 11.28 %
The after-tax net profit of preferred dividends on redeemable preferred shares per 1 peso of total
shareholders' equity in the firm is P0.11.
Turn-over ratio
1. Finished Goods or Inventory Turnover
Cost of sales
=
Average Finished goods Inventory
5,498,000.00
=
390,000.00
= 14.10 times
The entity has been sold and replaced the inventories 14.10 times during 2018. The inventories are
significantly turned fastly into the cost of goods sold.
2. Average Sale Period or Average age of Inventory
365 days
=
Inventory Turnover
days
365
= 14.10 times
= 26 days
The entity takes only 26 days to sell the entire/average inventory.

3. Account Receivable Turnover

Net credit sales or Net sales
=
Average accounts receivable
6,922,000.00
=
338,050.00
= 20.48 times
The entity has turned an accounts receivable into cash about 20.48 times during 2018.
4. Ave. Collection Period or average age of Receivables
365days
= Accounts Receivable turnover

= 365 days
20.48 times
= 18 days
The entity takes an average of 18 days to collect the credit sales.
5. Operating cycle or conversion period
= average age of inventories + average age of receivables
26 days
=
18 days
= 44 days
The inventories of the entity takes an average of 44 days to convert in into cash.
6. Total Asset Turnover
Net sales
=
Average Total Assets
6,922,000.00
=
4,370,500.00
= 1.58 times
The entity is producing P1.58 of revenues for every 1 asset of the entity owns.
7. Accounts payable Turnover
Net Credit Purchases or Net Purchases
=
Average Accounts payable
3,907,000.00
=
315,350.00
= 12.39 times
The entity has an effective utilizing the trade credit line offered by suppliers in financing its purchase.
8. Ave. Age of Accounts payable or Average payment period
365 days
=
Accounts payable Turnover
365 days
=
12.39 times
= 29 days

The firm takes an average of 29 days to pay all of its credits purchases.